Nov 18 - 24, 2002

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.

PAGE: Having authored and published two books for children in English, why did you decide to do your MBA and become an analyst?

NAYANTARA: 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.

PAGE: What are your views on PTCL's privatization and deregulation of the sector?

NAYANTARA: 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.

PAGE: How do you evaluate Engro's decision to invest in Oman?

NAYANTARA: 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.

PAGE: What are the current prospects for consumer goods companies in Pakistan?

NAYANTARA: 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.

PAGE: How can the quality of equity research be improved in Pakistan?

NAYANTARA: 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.

PAGE: How do you think research can avoid being influenced by sales team?

NAYANTARA: 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 are independent.