Interview with Tariq Iqbal Khan, Chairman & Managing Director, National Investment Trust

Feb 19 - 25, 2007

For those having stakes in the National Investment Trust (NIT) really meant to have won a lottery ticket on the back of multiple increases in its unit prices in recent years, which was made possible only due to a freehand given to its management by the present government.

Today, NIT has earned a reputation in the eyes of the investors that every big investor associated with the capital market desires to bid for this growing concern.

Since inflation has become the burning issue of the day, PAGE discussed various aspects of the issue with Chairman NIT Tariq Iqbal Khan in an interview. In his opinion, one of the major reasons for inflation is the monetary expansion in the recent years, amounting to Rs740 billion in 2006 as compared to Rs433.8 in the year 2002 that speaks itself the whole story of the inflationary pressures in the country.

When asked to suggest effective ways to check inflation currently reaching in the double-digit, Tariq was of the view that what has already been expanded you cannot bring it back to its previous level, however, the only effective way to offset the monetary expansion is to enhance productivity and to produce export surplus to mitigate the inflationary pressures. Besides that the economic managers would have to look for new avenues for increasing national income, especially in the given circumstances - privatization of the state-owned income generating entities.

Giving an analytical view of the prevailing economic conditions in the country, Tariq outlined the source of national income in three segments i.e. revenue generation through taxes, oil & gas development surcharge and property value.

Taking a look at these sources one comes to know that though the tax revenues have grown upward yet they are on decline when compared with tax-GDP ratio. To enhance tax-GDP ratio, the only way is to achieve economy of the scale in our manufacturing sector, he observed.

When asked to comment over impressive growth in NIT units in recent years giving windfall profits to the unit holders, specially the banking sector such as the National Bank, Bank of Punjab and Faysal Bank, Tariq said actually it was mandatory for NIT to invest at least 20 percent in all sectors listed with the stock exchange. In that blanket investment we had no choice but to lose on account of poor performing scrips. Now we are free to invest in the stocks of our choice which add value to our units. On the query that which stocks he considered worth investing, Tariq pointed that currently the hot areas are energy, banking and fertilizer sectors.

It may be mentioned that currently the active players are eagerly looking forward for privatization of NIT, which may ignite spark in the stock markets of the country.

Replying to a question regarding project financing, Tariq said that at present the existence of development financial institutions is missing in our financial sector, which is a basic requirement for conceiving a project and turning it into a reality. This calls subtle handling of the idea and investment, which cannot be delivered by the commercial banks, hence the need of DFIs is vital, he thought.

It may be recalled that NIT commenced operations from January 1963 and its functions are regulated, apart from the Trust Deed, by the National Investment (Unit) Trust Ordinance-1965. The government established NIT in order to encourage the broad-basing of the ownership of the growing industrialization in the country.

At present it is the largest mutual fund in Pakistan and also stock market's largest single investor. Its investment in 500 out of 725 listed companies with significant holdings in small to medium sized companies, however, carries a distinction of its track record for paying regular dividends since 1964.

NIT has a network of sale outlets spread across the country, including 19 branches, two UBL sales counters in Karachi and 150 authorized branches.

NIT makes investing simple, accessible and affordable. NIT's unique attraction provides investors a convenient access to Pakistan's growing equity markets.

The professionals at NIT carry out research on the annual accounts of the company and the relevant information about the industry, and with their relevant analytical skills and appropriate tools they help facilitate investment decision-making.

Looking at financial results of NIT (December 2006), it has once again outperformed the benchmark of KSE-100 Index by a handsome margin of 4.74 percent while net asset value of NIT unit increased by 5.25 percent from 43,07 as on June 30, 2006 to Rs45.33 as on December 31, 2006. The net income registered at Rs1.46 billion translating into EPU at Rs1.05. The profit earnings worth Rs6, 691 million include a capital gain of Rs5, 128 million earned from the sale of strategic holding of National Refinery Limited through Privatization Commission.