SAUDI-PAK INDUSTRIAL AND AGRICULTURAL INVESTMENT COMPANY

From SHAMIM AHMED RIZVI,
Islamabad
May 19 - 25, 2003

Saudi-Pak Industrial and Agricultural Investment Company (Pvt) Ltd is paying significant role in the economic growth of Pakistan by providing much needed credit facilities to the Industrial and Agricultural Sector. A joint venture of the Government of Pakistan and the Kingdom of Saudi Arabia was set up in 1981 to strengthen economic ties between the two countries by contributing in economic development of Pakistan through investment specially in industrial and agricultural projects.

The contribution of Saudi-Pak to the industrial development of the country can be gauged by the magnitude and quality of financing it has extended to various sectors during the past two decades of its existence. Since inception upto December 31, 2002, Saudi-Pak approved overall facilities of Rs.16.3 billion: Rs.14.32 billion funded and Rs.1.97 billion non-funded. The board breakdown of these facilities is as under:

CUMULATIVE NET FINANCING AND INVESTMENT APPROVED:
AS ON DECEMBER 31, 2003

   

(Rs. in million)

FUNDED

AMOUNT

%

%

Term financing

6.545.824

45.71

40.19

Short-term financing

5,178.812

36.16

31.80

Direct enquiry investment/placement

1,615.345

11.28

9.92

Lease financing

980.940

6.85

6.02

Sub-total

14,320.921

100.00

87.93

NON-FUNDED

Underwriting of shares

1,249.417

63.54

7.67

Guarantees

1,966.800

3.46

4.40

Sub-total

1,966.217

100.00

12.07

Total amount

16,287.138

.

100.00

As would be observed from the above table, of the funded facilities, term financing accounted for 46% of total financing followed by 36.2% for short-term financing and 11.3% as direct equity investment/placement. Under non-funded facilities underwriting of shares was to the extent of 63.54% followed by guarantees at 36.5%. Taking overall approvals, the trend remains consists i.e. term financing 40.2% followed by short-term financing 3.8% equity investment/placement about 10%, underwriting of shares 7.7% and guarantees 4.4%.

DISBURSEMENT BY TYPES OF ASSISTANCE:

Disbursements have been prompt and responding to the implementation needs of projects sanctioned. Moreover, it has been endeavor of the company to come to the rescue of its financed projects whenever these appear to be running into difficulties. These efforts have been in the shape of rescheduled of its loans and financial restructuring packages.

As against the total approvals of Rs.16.3 billion upto December 31, 2002, disbursements amounted to Rs.12.7 billion i.e 78% of sanctioned sum. Term financing with Rs.6 billion topped the list of disbursements, followed by short-term credit of Rs.4.42 billion, equity investment of Rs.0.94 billion and investments in Associated Companies, shares take-up of Rs.0.675 billion against underwriting.

The outstanding magnitudes of funding under various modes of financing to various sectors with number of projects covered as on March 31, 2003 is summarized below:

FUNDING UNDER VARIOUS MODES

   

(Rs. in million)

SECTORS

NO. OF PROJECTS

TOTAL FINANCING (OUTSTANDING)

% OF TOTAL

Textile

47

1658.658

25.579

Chemicals/fertilizers/
pharmaceuticals

17

988.664

15.246

Automobile/transport service/communication.

14

876.757

13.521

Energy/oil/gas

9

506.969

7.818

Cement

10

485.188

7.482

Leasing companies

18

311.027

4.796

Sugar/allied

10

194.637

3.002

Hotels

4

171.700

2.648

Electrical/electrical goods/electronics

4

129.756

2.001

Banaspati/allied projects

2

110.000

1.696

Banks

2

102.934

1.587

Engineering/construction

3

100.000

1.542

Basic metal/metal products

6

96.209

1.484

Dairy/poultry/others

2

45.697

0.705

Paper/board

2

20.771

0.320

Rubber/rubber products

1

11.181

0.172

Miscellaneous

27

674.408

10.400

Total

178

6,484.556

100.00

STRATEGIC INVESTMENTS

Saudi-Pak since coming into being has made strategic investments in the fields of leasing and banking. These are briefly as under:

1. SAUDI-PAK LEASING COMPANY LIMITED

In 1997, Saudi-Pak acquired 30% stake in Standard Chartered Mercantile Leasing Company Limited, now Saudi-Pak Leasing Company Limited. The company is listed on the Stock Exchange and is the fifth largest company in the leasing sector in Pakistan.

2. SAUDI-PAK COMMERCIAL BANK LIMITED

In September 2001, Saudi-Pak acquired controlling interest in Prudential Commercial Bank Limited now Saudi-Pak Commercial Bank Limited. The bank has a paid up capital of Rs.1.5 billion and is listed on the Stock Exchange. It has its main office in Karachi and a network of 28 branches operating in major cities of the country.

The bank mobilizes deposits of all types and provides full of funded and non-funded financing facilities to its customers. The deposits base of the bank stood at Rs.12.4 billion and advance at portfolio at Rs.9.7 billion as on December 31, 2002. The balance sheet footing touched the level of Rs.19.6 billion. The bank has turned the corner from a net loss position of Rs.182 million in 2001 to a net profit of Rs.202 million during the year ended December 31, 2002.

Vigilant monitoring of projects financed by Saudi-Pak remains the top priority of the management, as it is crucial to timely completion of projects without cost over runs. This is also necessary for profitable operations of the assisted projects and recovery of funds disbursed by Saudi-Pak. Through intensive and extensive monitoring of Saudi-Pak financial projects, it is ensured that the funds disbursed are used for the purpose for which sanctioned and that there is no diversion of funds.

Saudi-Pak has built excellent loan portfolio over the years. The amount of loan recoveries, as well as recovery ratio have been improving over the years. During the year ended December 31, 2002, current collection ratio stood at 93.8% and overall collection ratio gets significant improvement.

FINANCING OF OPERATIONS:

The funds for financing activities were originally contributed by the shareholders i.e. the two sponsoring governments and have subsequently been supplemented by mobilization of funds from the financial markets both national and international.

The paid up capital of the company is two billion Rupees contributed equally by the two governments. To further augment its resources, Saudi Pak issued a series of TFCs which carried floating rates of return and were subscribed by commercial banks and financial institutions. To meet its needs for funds, Saudi Pak relies on borrowing from the banks and non-bank financial institutions. Average amount of borrowing as on 31st March 2003 stood at Rs.6.2 billion. This is also indicative of the very sound creditworthiness of Saudi Pak in the financial circles of the country. As on December 31, 2002 the equity vase of the company broadened to Rs.3.25 billion which is one of the largest amongst bands and financial institutions in Pakistan. The company is supported by a solid asset based of Rs.9.51 billion as on December 31, 2002. Total liabilities amounted to Rs.5.5 billion. Liquid assets aggregated to Rs.1.89 billion (20.7% of total assets) which liquid assets were 34.5% of total liabilities quite a satisfactory position.