NAYANTARA NOORANI completed her MBA from Institute
of Business Administration and launched into a career in equity research
by joining KASB, as an investment analyst, where she worked until
recently. Currently she is working at AKD Securities, in the same
capacity. She covers Telecommunications, Fertilizer and fast moving
consumers goods (FMCG) sectors.
Having authored and published two books for children in English, why did
you decide to do your MBA and become an analyst?
For me writing fiction is a hobby and in my opinion, not something you
require formal training for. However, business school has given me the
leverage to launch into a career of my choice. After completing my MBA,
I received several interview calls one of which was from Khadim Ali Shah
Bukhari. Given the favourable impression I formed of the people I met
during my interviews, I was tempted to say yes to the offer. The added
attraction is that I enjoy writing and working with numbers and hence my
decision to take the plunge in the direction of research. I have to say
that I have never for a second regretted the decision given that I have
learnt so much since I began working, which is to a great extent due to
the guidance I have received from the colleagues I have worked with.
What are your views on PTCL's privatization and deregulation of the
PTCL's privatization has officially been delayed until 1Q03. The delay
of privatization at least into next year and deregulation around the
corner, raises some important questions with regards to the long-run
viability of the company in a competitive environment under the current
management. Though the proposed draft deregulation policy does not seem
to pose any immediate threats to PTCL, it is true that despite being a
monopoly the company has not fully capitalized on this advantage. PTCL
currently has one of the most attractive EBITDA margins in the region.
Although I will have to wait till the deregulation policy is finalized
and announced before I make specific comments, but in general
deregulation is likely to result in a decline in margins for PTCL as
competition heats up and hence the company must address efficiency
issues sooner rather than later.
How do you evaluate Engro's decision to invest in Oman?
Engro's logic behind investing in a urea plant in Oman is fairly
straightforward since it is motivated by the cost advantage of producing
fertilizer with the lower priced feedstock in Oman, relative to
Pakistan. The management claims that since the company has plans to
start operations with a used plant, the return on their investment is
potentially higher than other such projects in Oman. The company has
already demonstrated its capability of running used plants at high
levels of efficiency.
What are the current prospects for consumer goods companies in Pakistan?
There is tremendous growth potential for consumer goods companies in
Pakistan, given the fact that the high population presents a large
market. On a macro level, stable price growth and lower interest rates
should boost consumption and hence sales for consumer goods in FY02.
More recently, the GoP's upward revision of all major rabi and kharif
crops for FY03 by 5-7% above FY02 levels also bodes well. Further, the
reduction in the maximum import duty from 30% to 25% and the stronger
rupee has meant lower import cost for companies such as Unilever
Pakistan whose operation center largely on importing finished and
semi-finished goods. On the other hand concerns for the top line remain
tied to the threat of smuggling and the fact that though the Federal
Budget FY03 has been lenient on the lower and middle class consumer
disposable income has been lowered due to rising utility prices.
How can the quality of equity research be improved in Pakistan?
There is no dearth of talent in Pakistan. However, with most experienced
analysts having opted to migrate or to switch careers, there are few
senior analysts in the industry who are in a position to give on the job
training. Moreover, with declining foreign investor interest in the
market on account of perceived higher country risk, the pressure to
ensure that research is top quality is declining. However, things have
begun to change for the better. New analysts have begun to enter the
arena and are being trained. Moreover, with the market's performance
over the last year foreign fund managers are beginning to look at the
Pakistani market with interest. In such a scenario, the demand for
quality research is likely to rise.
How do you think research can avoid being influenced by sales team?
I think an analyst must have very strong personal ethical standards with
regards to his work. At a broader level, the best way to ensure
independent research recommendations is to embed personal responsibility
and quantifiable ethical standards in the departmental and in fact
organizational culture. I think though that the best way to reduce
friction between sales and research is to promote an understanding of
where the other stands. Give that and intellectual freedom to the
research team and I think you can be pretty sure that research opinions