PICIC: THE EMERGING FINANCIAL SUPER MARKET

Turning adversity into gains and broadening horizon
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BY SHABBIR H. KAZMI
Sep 08 - 14, 2003

Pakistan Industrial Credit and Investment Corporation (PICIC) has embarked upon a business diversification plan aimed at providing the various financial services under one banner. The plan aims at achieving diversification of business and extending periphery of its activities. It has already achieved three objectives by acquiring a commercial bank and management rights of some of mutual funds managed by Investment Corporation (ICP) and commencement of leasing business. It has also been pre-qualified to participate in the bidding process for acquisition of management rights of National Investment Trust (NIT).

It will not be wrong to say that PICIC is an organization that has very closely identified itself with the national causes and exudes in its all endeavors. Its vision is, "To be a premier financial institution of international standard and repute, offering innovative value-added products and services, tailored receptively to the customers needs and satisfaction, while optimizing the shareholders' value through meeting their expectations, making PICIC an investor preferred institution."

Playing a pivotal role in industrialization of Pakistan, till June 30, 2002, it had financed 1,253 industrial projects throughout Pakistan with gross financial assistance of Rs 33 billion. PICIC is an institution that has seen various stages of Pakistan's economy, its rise and falls. Since its inception in 1957 till 90s PICIC's financial position was very sound. However, in 1990s its financial stability was eroded resulting in operating losses and large quantum of infected portfolio. PICIC after turning around in financial year 1997, has been consolidating its position. It has once again resumed its core business of long-term financing. Now it offers complete range of financial services from commercial and merchant banking to auto and medical equipment leasing.

In merchant banking area, the major initiative was acquiring controlling share of Gulf Commercial Bank. After the takeover, the name was changed to PICIC Commercial Bank. The new management envisaged ambitious targets of deposits as well profit. The targets were formidable but not beyond achievement albeit fierce competition in the market. The main thrust of the policy was to curtail expenditure without compromising efficiency, cutting further the average cost of funds in conformity with the official policy to facilitate lending at competitive rates and enhance profitability of banking operations. Within a short span of time, PICIC Commercial Bank has become one of the major players. It is also following an ambitious branch expansion and upgradation programme to further improve the quality of services.

PICIC established a leasing division and within a short span of time, it has become one of the prominent members of the leasing industry offering a multiple range of leasing products. Special lease products have been developed for industrial customers, small and medium enterprises (SMEs) and individual professionals to help improve their quality of services. PICIC has also launched its 'Medical Equipment Leasing' programme. This is aimed at upgrading the existing facilities in the country and making the services affordable.

PICIC has acquired management rights of 13 mutual funds, commonly known as Lot-B and State Enterprise Mutual Fund (SEMF) floated by the ICP. Net asset value of Lot-B when acquired was Rs 1,550 million had gone up to Rs 3,128 million on August 28, 2003 an increase of 102%. Net asset value of SEMF when acquired was Rs 3,725 million touched Rs 5,789 million on August 30, 2003.

Taking advantage of the bullish conditions of equities market, PICIC has also restructured its widely held portfolio. Efforts are being made to make it more liquid and efficient. PICIC's strategy has been to realize capital gains and liquidation of non-performing portfolio. The effective pruning of the portfolio and accumulation of blue chip shares as improved dividend income and resulted in substantial capital gains.

However, none of the above mentioned achievement would have been impossible, had the management not followed a very rigorous recovery policy to improve its financial health. PICIC also made relentless efforts to the restructuring and rehabilitation of sick units and the orderly transfer of assets of sick projects to new investors. These measures have yielded positive results.

The efforts of management have not only yielded positive results but also led to upgradation of its credit rating. This is recognition of the enhanced risk absorption capacity of PICIC emanating from a stronger financial structure. At the same time PICIC's strong liquidity position provides adequate comfort for meeting short-term obligations.