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Profile REHAN QAISER
Column FOR THE RECORD
Information Technology  THE NEW ECONOMIC
Politics & Policy MISSILE TESTS RESTORE BUSINESS CONFIDENCE
Politics & Policy PERFORMANCE THE PRESENT GOVERNMENT
Corporate Profile FIRST GRINDLAYS MODARABA
Corporate Profile CYBER INTERNET SERVICES (PVT.) LTD
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CORPORATE PROFILE

FIRST GRINDLAYS MODARABA

June 03 - 09, 2002

With over 8.7 billion in lease and musharika disbursements and a profit pay-out to its certificate holders of Rs. 831 billion since it's floatation in 1987, First Grindlays Modaraba (FGM) is undoubtedly one of the most successful and respected name in the leasing business. FGM maintains its leadership position and continues to be a pioneer in introducing new products and concepts for development of the Modaraba sector and benefit of its certificate holders.

FGM is managed by Grindlays Services of Pakistan (Private) Limited which is a wholly owned subsidiary of Standard Chartered Grindlays Bank Limited. In Pakistan, the Standard Chartered Group, comprises of Standard Chartered Bank, Standard Chartered Grindlays Bank and FGM.

The Management Company holds 10% of the equity and Standard Chartered Grindlays Bank holds another 10%. The balance 80% is held by the general public, out of which more than 40% are individual shareholders. The board of directors of the modaraba management company comprises three nominees of Standard Chartered Group.

FGM is primarily engaged in leasing of plant & machinery, motor vehicles (both private and commercial) and office/computer equipment and operates from offices in Karachi, Lahore and Islamabad. With equity, as at March 31, 2002, of Rs. 801 million, and gross leased assets of over Rs. 3.7 billion, it is by far the largest leasing modaraba in the country and ranks amongst the largest and most profitable leasing entities.

FGM's success story has been made possible through efficient utilisation of resources and operational practices applied within the Standard Chartered Group. This standard of performance is reflected in the financial strength rating of A2 assigned to FGM by Pakistan Credit Rating Agency. This represents the highest rating in the entire modaraba sector and represents "a modaraba in outstanding financial condition with a consistent record of above average performance".

FINANCIAL RESULTS

A study of FGM's financial results for the 9 months ended March 31, 2002 suggests it is well on its way to another year (year ending June 30, 2002) of sound performance. (Some of FGM's achievements during 2001 are summarised in Table 1 while FGM's last 5 years at a glance is presented in Table 2)

FGM's net profit of Rs. 128 million for the period of nine months ended March 31, 2002 was 9.41% higher than the corresponding figure last year. Total operating income was Rs.800 million for the nine months ended March 31, 2002 compared with Rs. 747 million during the corresponding period last year. Lease and musharika investments during the current nine months period aggregated Rs.839 million as against Rs.589 million during the corresponding nine months period.

Although competition amongst leasing entities has intensified as commercial and investment banks have entered the leasing business, FGM continues to maintain profit levels by optimizing all available resources, increased customer focus and wider market coverage.

INDUSTRY ANALYSIS

FGM's profitability ratios of return on assets of 5.3% (7.07 annualised) and return on equity of 15.9% (21.2 annualised) for the nine months ended March 31, 2002, continue to remain, by far, the highest amongst all leasing entities in the country. (An analysis of the top 6 leasing entities is presented in Table 3).

CERTIFICATES OF MUSHARIKA

FGM's Certificate of Musharika (COMs) scheme for general public, which was launched in January '2001 has provided opportunity to small investors to share in FGM's profitability and at the same time provided FGM with matched funds for its future growth.

This pioneering Islamic Instrument which has attracted investments worth over Rs. 321 million as March 31, 2002, can be bought at FGM's or any 22 Standard Chartered Bank and Standard Chartered Grindlays Bank branches across Pakistan. (See Table 4 for major features of the COM Scheme)

CONCLUSION

FGM continues to focus on enhancing shareholder value through optimizing funding mix and booking of quality risk assets. FGM has demonstrated the ability to maintain its leading position as reflected by outstanding and consistent performance, good asset quality and well conceived growth strategy taking cognizance of the prevailing operating environment.

STANDARD CHARTERED GROUP

In Pakistan, Standard Chartered Group comprises of Standard Chartered Bank, Standard Chartered Grindlays Bank and First Grindlays Modaraba.

Standard Chartered has 7 branches in Pakistan; 3 in Karachi, 2 in Lahore, 1 in Faisalabad and 1 in Islamabad and offers Consumer Banking, Corporate & Institutional Banking (incl. Cash Management products & services), Treasury, and Custodial Services to its customers. Standard Chartered has been providing banking services in this region for over 137 years. Standard Chartered Grindlays has 15 branches in Pakistan; 7 in Karachi, 3 in Lahore, 1 in Islamabad, 1 in Rawalpindi, 1 in Quetta and 1 in Peshawar and 1 in Sialkot, and offers Consumer Banking (including Credit Cards), Corporate Banking, Investment Banking, Treasury and Custodial Services to its customers. Standard Chartered Grindlays has been providing banking services in this region for over 140 years. First Grindlays Modaraba has 3 offices in Pakistan; 1 in Karachi, 1 in Lahore and 1 in Islamabad, and offers leasing and Islamic finance facilities to its customers. First Grindlays Modaraba has been providing services in Pakistan for over 14 years.

Standard Chartered is a London based, international bank focused on the emerging markets of Asia, the Middle East, Africa and Latin America. It has significant operations in Hong Kong, Singapore, Malaysia, Thailand, India, Bangladesh, the United Arab Emirates and in sub-Saharan Africa. Key businesses are Consumer Banking primarily credit cards, mortgages, personal loans, auto loans and wealth management and Wholesale Banking, where the Bank specialises in the provision of cash management, trade finance, treasury and custody services. The Group has a network of over 500 offices in more than 50 countries. With a presence in Asia and Africa that goes back nearly 150 years, Standard Chartered has an in-depth understanding of, and a long-term commitment to, the emerging markets.

Table 1

Achievements 2000 - 2001

* Financial strength Rating of A2 by Pakistan Credit Rating Agency. This represents the highest rating in the entire modaraba sector.

* Award received from Modaraba Association of Pakistan for highest dividend pay-out (30%) in the entire modaraba sector, for the year ended June 30, 2000.

* Certificates of Musharika scheme (a pioneering effort) launched for general public in January 2001.

* Website launched.

 


 

Table 2

Five Years at a Glance

 

1997

1998

1999

2000

2001

Key Financial Figures (Rs. in millions)

. . . . .

Assets Leased Out

1,436

1,563

1,811

1,922

2,096

Paid-up Capital

346

374

374

374

374

Total Equity

570

592

624

647

673

Lease Disbursements

676

687

769

715

966

Operating Income

676

673

755

860

1,000

Net Profit

95

105

114

135

149

Key Performance Indicators (Rs.)

. . . . .

Cash Dividend per Certificate

2.20

2.20

2.20

3.00

3.30

Earnings per Certificate

2.75

2.81

3.05

3.61

3.98

Break-up Value per Certificate

16.47

15.83

16.68

17.30

17.99

Price-Earnings Ratio

4.18

3.92

4.02

4.04

4.80

 


 

Table 3

FIRST GRINDLAYS MODARABA
Comparative analysis of six largest leasing companies ranked by net investment in leases
MARCH 31, 2002

COMPANY
NAME

Paid Up Capital (Rs. in mn)

Owners
Equity
(Rs. in mn)

No. of shares (Rs. in mn)

Break-up value Rs.

Total Assets (Rs. in mn)

Net investment in leases (NIL) (Rs. in mn)

Profit after tax (Rs. in mn)

Earnings Yield

Return on Equity

Return on Total Assets

Orix Leasing

242

1,102

24

45.54

10,889

9,437

72

29.75%

6.53%

0.66%

Askari Leasing

324

746

32

23.02

8,613

6,849

43

13.27%

5.76%

0.50%

NDLC

377

1,271

75

16.86

5,018

4,538

22

5.84%

1.73%

0.44%

PILCORP

218

596

22

27.34

3,826

2,819

12

5.50%

2.01%

0.31%

FGM

374

801

37

21.42

2,402

2,093

128

34.22%

15.98%

5.33%

Saudi Pak Leasing

220

362

22

16.45

2,703

1,890

12

5.45%

3.31%

0.44%

 


 

Table 4

Certificates of Musharika (COMs)
Major features of the COM Scheme are given below:

Registered

A unique registration number shall be assigned to each certificate upon issue.

Maturity

Available in tenors of three months, six months, one year, two years, three years, four years and five years.

Currency

Pakistan Rupees only.

Denominations

Minimum denominations of Rs. 5,000

Investment Limit

A minimum investment of Rs. 10,000

Expected returns*

* 3 months 6.00% per annum

.

* 6 months 6.50% per annum

.

* 1 year 7.00% per annum

.

* 2 years 9.00% per annum

.

* 3 years 10.00% per annum

.

* 4 years 10.50% per annum

.

* 5 years 11.00% per annum

* subject to change.

Profit payments are made on a quarterly bases.

Profit Calculation

Profit rates to be computed on a 365 days basis and paid for the actual number of days the certificate remains outstanding within the relevant profit payment quarter.

Premature Encashment

Permitted at any time. A redemption reserve fund equal to 5% of the face value of COMs outstanding has to be maintained by FGM to cater to premature encashments.

Penalty

1% of encashment value.

Transferable

Yes.

Taxation/Zakat/Stamp duty

Subject to 2.5% Zakat and withholding tax 10% wherever applicable. Stamp duty 0.15% of face value on issue and 0.10% on transfers.

Profit Payment Mode

By crossed cheque/ direct account transfer for SCGB/SCB account holders.