An interview with
Humayun Murad, CEO, Orix Leasing Pakistan
By SHABBIR H. KAZMI
Feb 28 - Mar 05, 2000
"The strength of Orix Leasing Pakistan Limited has been its
ability to anticipate change and create new business, based on fresh concept, that go
beyond existing framework. The Company is known for its flexibility and providing
specialized innovative support across a broad range of financial services. The business
philosophy of the Company enabled it to operate successfully and overcome the challenges
faced during the year 1998-99 by making necessary adjustments in its business strategy and
day to day operations. The volume of business grew by 44 per cent and profit before tax
improved by 12 per cent in the year as compared to the year 1997-98. These were the
remarks of Humayun Murad, chief executive, Orix Leasing Pakistan Limited while talking to PAGE.
"Machinery and industrial equipment used to account for more than
half of our lease disbursement but the share has been declining in recent past. Efforts,
to increase business, had started during 1997-98 to make up for the fall by boosting lease
of other assets. The result was that in 1998-99 total lease disbursement increased by 44
per cent amounting to over Rs 2 billion the highest volume ever achieved by the
Company. Commercial vehicles and saloon cars accounted for 57 per cent of the total leases
underwritten during the year. Financial assistance was provided to 1289 business
enterprises, majority of which were small and medium size businesses" said Murad
while dilating the revised strategy of the Company.
Declining trend of profit, witnessed in the last two years was also
reversed. Profit before tax for the year increased by 12 per cent to Rs 150 million as
compared to a profit of Rs 134 million posted for the year 1997-98. The earning per share
also improved from Rs 5.16 to Rs 6.48 during this period. These results appear more than
impressive if one reviews it in the backdrop of slowdown in economic activity and
depressed conditions for investment in the country. Low investment in plant and machinery
has a direct bearing on leasing business. On top of this, foreign credit lines almost
dried completely due to inability to hedge the exchange rate risk.
According to Murad, "During the year 1998-99 our income from
operations increased by about 8 per cent to Rs 905 million. Although 'finance lease'
remained our core activity, increasing contribution was made by 'operating lease'
contracts and lease of automobiles to individuals. 'Consumer finance' maintained steady
growth. At the same time efforts were made to optimize operating costs. Selling, general
and administrative cost increased by 6 per cent. This seems to be a modest increase
keeping in view the impact of inflation and the increase in expenditure due to expanding
"Another important step was to ensure that the lease portfolio of
the Company did not impair during the rcessionary environment. Due to rigorous monitoring
and stringent credit controls 'infected portfolio' reduced and recoveries remained
excellent. Provisions for potential bad leases was about Rs 32 million. The accumulated
general provisions amounted to Rs 135 million which was 3.72 of the net exposure on net
receivables", Murad added.
While commenting on overall business environment, particularly for the
leasing companies, Murad said, "Now we are being regulated by the Securities and
Exchange Commission of Pakistan (SECP). The new rules being circulated by the SECP do not
contain anything drastically different from the old. Most of the laws are the same but
some have been rationalized. Therefore, once they are enforced, operations of leasing
companies are expected to improve. I would like to say that the SECP has constantly
involved the Leasing Association of Pakistan in its effort to remove impediments. If this
consultation process continues one can expect even better working environment in the
future. Since leasing companies are the only source of medium term financing, at least for
the time being, it necessary to strengthen the leasing sector to play its due role."
Murad did not hesitate in commenting on CBR's efforts in raising the
additional taxes but the manner it is being done. He objected the way CBR is trying to
increase collection by issuing 'uncalled-for' demand notices. Such notices can only be
termed as efforts to raise additional revenues from those who discharge their full tax
liability in the best possible manner.
"Leasing sector now has an established market niche and is also
capable of meeting the need for medium-term finance in the country. We expect a steady
growth in the volume of our business together with greater consolidation of the new
products already launched. The clients are also expected to benefit from declining
interest rates", Murad concluded.