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PROFILE MUHAMMAD NAQI
COLUMN FOR THE RECORD
EDUCATION ROLE OF HEC IN HIGHER EDUCATION
SOCIETY 1- BRAIN DRAIN: HOW EXPENSIVE IT IS?
2-
HEALTH INSURANCE
CORPORATE PROFILE 1- AL-ZAMIN FLOATS 1ST ISLAMIC TFCS
2-
SIGMA LEASING CORPORATION LIMITED

 

AL-ZAMIN FLOATS 1ST ISLAMIC TFCS

 


July 28 - Aug 03, 2003
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Al-Zamin Leasing Modaraba, based at Karachi, is to sell first ever bonds being issued by the Modaraba Sector of the country on the Islamic principles by next month worth 250 million rupees having a maturity of five years, said Chief Executive of Al-Zamin Leasing Modaraba Mr. Basheer A. Chowdry.

While the module and modalities of the instrument have been vetted by the religious scholars and approved by the Securities & Exchange Commission of Pakistan, Al-Zamin is in the final stage of completing all regulatory and operational technicalities to sell bonds commonly known as Term Finance Certificate (TFC) worth one billion rupees, said Mr. Chowdry said in an interview.

"We will float these bonds in three or four tranches and plan to list them at the Karachi Stock Exchange by next month", he said.

Out of 250 million rupees, 200 million rupees are for banks, mutual funds, financial institutions and corporates while 50 million rupees for public subscription with a green shoe option for another 50 million rupees. An overwhelming demand has already been registered for the private placement far in excess of 200 million rupees from the financial and corporate sector which, according to Mr. Basheer Chowdry, reflects the confidence of the investors in the quality of the instrument and the Issuer and confirms that the public floatation will also be substantially oversubscribed.

The investors will get six-monthly profits on the proposed five-year Islamic bond. An interim profit will be paid irrespective of the actual profit or loss made by the Modaraba. If the final profit payment determined on the basis of the annual audited accounts was in excess of provisional profit payments then the excess amount would be paid alongwith next six monthly profit.

A salient feature of the Musharaka-based TFC would be the Takafful Reserve to which Al-Zamin Modaraba would contribute an initial amount and also allocate a percentage of subsequent profits to build a pool. This pool of fund would remain available during the tenure of the bond to take care of profit distribution on due dates and to insulate the investors from any operational losses during the life of the bonds.

The concept of Musharaka-based bond was designed late last year by Modaraba Association of Pakistan with technical assistance of AMZ Securities, a local brokerage house in Karachi. Profit-sharing under a Musharaka-based TFC will be based on an agreed profit sharing ratio and will be decided at the inception of the bond transaction. It is expected to be around 8.75 per cent. Trustees functions will be handled by Saudi Pak Investment Company.

Al-Zamin Modaraba is engaged mainly in the leasing business and has earned a respectable image of being prudent and progressive entity managed by experienced bankers and professionals. Commencing its operations in 1992, it has achieved a record of consistent growth and profitability. Being a multi functional modaraba in nature, Al-Zamin also participates in the short-term investments on profit and loss basis, equity participations, financial advisory services, project handling and portfolio management. The Modaraba has also been undertaking mergers and acquisitions, which have increased in its equity base to over 320 million rupees and assets base to over 1,200 million rupees.

The floatation of the Musharaka based TFCs will resolve a long outstanding problem of the modaraba sector for resource mobilization. It will not only provide direct access to Al-Zamin and other Modarabas to individual and corporate investors, it will also reduce their funding cost which would help their marketing efforts and eventual profitability. The issuance of TFCs also establishes the fact that the concepts of Islamic financial system can be effectively implemented in the contemporary investment environment without compromising on the fundamentals of Islamic ideology.

 

 

The TFCs' like floatation is for mid August through a formal subscription to be opened at the Karachi Stock Exchange for 50 million rupees, as the pre-public floatation placement of 200 million rupees has already been substantially been over subscribed. In the mean time further details are available with the issuers (alzamin@cyber.net.pk) and AMZ Securities (kashif.shabbir@amzsec.com).

Pakistan is the only Islamic country where the concept of Modaraba has been implemented through a comprehensive legislation and regulatory infrastructure to implement the relationship between the investors and the professional managers. In a broader sense, it is a customized version of a mutual fund in which the admissible mode of business are determined on the true profit and loss sharing principles. Modaraba sector in Pakistan is a significant component of the financial institutions of the country, having total equity of about 9,000 million rupees and total assets of about 18,000 million rupees. There are 34 modarabas currently operating mostly handling Ijara (Leasing) business.

AL ZAMIN LEASING MODARABA

Al-Zamin Leasing Modaraba (Al-Zamin) is a multipurpose perpetual Modaraba engaged mainly in the leasing of varied nature, equity market operations, project financing, arranging syndication and financial consortiums and providing consultancy and advisory services. Its clients include financial institutions, medium to large sized commercial organizations and industries, trading entities and professionals. Its sponsors include reputed financial institutions of the country and well-known businessmen and professionals. Al-Zamin is distinguished by the fact that its Board of Directors and Management include senior bankers having rich and varied experience in domestic and international banking and investment, which has ensured a highly professional operation of the Modaraba resulting in prudent planning and continued growth over the last 11 years.

As a part of its growth strategy, Al-Zamin has been going through a process of acquisitions and mergers. Over the last three years, it acquired Ghandhara Leasing Co. Ltd. and First Professionals Modaraba which increased Al-Zamin's equity to Rs.320 million and assets base to over Rs.1,200 million. JCR-VIS Credit Rating Co. has assigned a rating of A- (Single A Minus) to Al-Zamin's TFC issue.

The Chairman of the Modaraba, Mr. Zafar Iqbal is a reputed professional and has served in the Civil Service of Pakistan. He was the Chairman, National Development Finance Corporation, Agricultural Development Bank Chairman, Pak Arab Investment Bank Limited and Chief Executive of Al-Faysal Investment Bank Limited. Besides heading a Board of Al-Zamin, he is currently the Chairman of National Refinery Limited and Social Marketing Pakistan (Guarantee) Limited which is an NGO.

 

 

Mr. S. M. Farooq, Vice Chairman of the Modaraba is a well-known industrialist and Chairman of Daikin Industries, Karachi, Daikool Airconditioners, Dubai and "AAA" Textile Mills, Farooq Silk Mills, Lahore.

Mr. Basheer A. Chowdry, Chief Executive is a professional banker, having 40 years of experience to his credit. Being a gold medalist from Punjab University, he holds a diploma in banking and is a member of British Institute of Management, British Institute of Directors and Institute of International Affairs, London. He has served as the Chairman of the Modaraba Association of Pakistan and is presently Vice Chairman of Leasing Association of Pakistan. He is a Director on the Board of Karachi Stock Exchange as a nominee of Securities and Exchange Commission of Pakistan and also member of Steering Committee of the United Nations Development Program Project and Corporate Governance. He is an independent professional Director of Saudi Pak Commercial Bank Limited as well. He has held senior assignments with Bank of Credit and Commerce International, United Kingdom and is a founder member of Al-Zamin.