INTERESTING DEVELOPMENTS IN FINANCIAL SECTOR

ABRAAJ CAPITAL DISPOSES OF 30 PERCENT STAKE IN NAS

AMANULAH BASHAR
June 23 - 29, 2008

Saudi investors of Abraaj Capital, led by Sheikh Abdulrahman Ali Al Turki, Chairman of Abraaj Capital, the premier investment firm specialising in private equity investment in the Middle East, North Africa and South Asia (MENASA) region, have announced the sale of their 30 per cent stake in National Air Services (NAS) to Kingdom Holding Company (KHC), founded by HRH Prince Alwaleed bin Talal bin Abdulaziz Al Saud, generating a 52 per cent internal rate of return (IRR) over a two-year holding period.

The valuation of NAS increased by four times over this period, providing an excellent return to the Abraaj Saudi investors. Founded in 1999 in Riyadh, NAS today is a leading provider of aviation services in the Middle East. The company's diverse portfolio of products and services includes Nas Air, the Kingdom's first low-cost carrier; NetJets Middle East, which provides fractional aircraft ownership and leasing; Al Khayala Airlines, an all-business-class carrier serving Jeddah, Riyadh and Dubai; Aircraft Management Services; Aircraft Charter Services and other unique aviation solutions.

Over the past two years, the active strategic involvement of Abraaj Capital allowed NAS to expand its reach and range of services substantially. In December 2006, NAS became the first private company to receive a Saudi Arabian government license to provide commercial aviation services from Riyadh. Last year, the company launched Nas Air, which was introduced with a fleet of five aircraft and is expected to increase to 18 aircraft by 2010. Nas Air currently serves 20 domestic routes with 241 flights per week. It has already started its first international flights to the UAE and plans to rapidly expand its international operations in 2008.

In 2007, NAS, with the support of Abraaj Capital, finalised one of the biggest aircraft acquisition deals by a private company in the history of Middle East aviation, by signing contracts with Airbus, Gulfstream, Dassault and Hawker Beechcraft. With an investment of US$4 billion, these agreements will bring the company's total fleet size to 167 aircraft by 2012, confirming its status as the fastest-growing private aviation fleet in the Middle East.

"National Air Services was founded less than a decade ago by a group of Saudi Arabian investors who shared a vision of the potential future of the aviation sector in the Kingdom and the wider region," said Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital. "Keep in mind that, at the start of 1999, oil was selling at barely US$12 a barrel and Saudi Arabia's annual GDP stood at just US$140 billion, compared to US$572 billion in 2007. A decade ago, few could have predicted the enormous economic expansion that has taken place in Saudi Arabia in the past few years and fewer still saw the opportunity in the aviation sector.

"Over the past two years, Abraaj Capital has made an extremely significant contribution to unlocking the value of this visionary company, which has undergone a corporate restructuring during this period of sustained organic growth and unparalleled expansion," he added. "By contributing our management expertise, we have clearly positioned NAS for even greater future growth. We wish the company continued success." "National Air Services has broadened its product and service portfolio, and enormously accelerated on its growth trajectory," said Ayed Al Jeaid, Chairman, National Air Services. "There is no question that this targeted expansion has been facilitated by the strategic support of Abraaj Capital, which has contributed to the ascension of NAS into the Middle East's premier provider of aviation services. We remain grateful to the firm for its lasting contribution to our record of achievement."

The current economic growth that is being witnessed by the Arab world in general and the GCC countries in particular is creating a demand in the aviation sector. As a result, this will create a strong need for the presence of a regional service provider in the aviation sector to meet the increased demand. Our strategic goal is to rely on the competitive advantages of NAS to develop this regional entity," said Ahmed Halawani, Executive Director of Private Equity in Kingdom Holding Company.

"Last year, Middle East passenger traffic grew by 11.4 per cent, including a record increase of 19.2 per cent in December 2007 alone. That growth was concentrated in the Gulf, and led by the most rapidly expanding economies, such as Saudi Arabia," he added. "We are confident that NAS will continue to be seen as the region's leading provider of aviation services and as the first-choice carrier for travelers based in the Kingdom and across the Middle East.

JS GROUP RISES AS GLOBAL ENTITY

JS group in the last 10 months due to effective branding from merely $50m has become $510m global company. Director Corporate Affairs, Nadia Munawar Siddiqi disclosed while delivering her keynote address in an Executive Series Tea Meeting on the subject of "Understanding Brand transactions needs & challenges" held by Marketing Association of Pakistan (MAP). She said that brands are the backbones of any company where constantly there should be a watch to know about the image of the company and customer experience and confidence with your desired brand portraying.

She advised that in case of any change due to the ground realities there should be absolutely no hesitation in doing so. She said that she started her career with JS group when she was only 14 years of age. Earlier, President MAP and Managing Director, SGS, Syed Farukh Mazhar said this is the third executive series meeting by MAP after his assuming the office in order to bring awareness about the latest marketing and changing trends around the globe. He said that MAP was launched 40 years ago, having 600 members while in November 2008 MAP will hold MARCON 2008 mega event. On this occasion, Council members of MAP Talib Saeed Kareem and Syed Imran Ali and a large number of association members and business community were also present.

FINANCIAL DEVELOPMENT

On the eve of its sixtieth anniversary, the State Bank of Pakistan (SBP) will organise a one-day Development Finance Conference on July 1, 2008 at SBP's Learning Resource Centre, Karachi.

The theme of the conference is "Expanding Frontiers of Financial Access in Pakistan" which will be addressed by prominent international and national speakers. The SBP has constituted a Development Finance Group in 2006 with requisite professional expertise and it covers a broad range of critical areas where access to development finance is needed to be nurtured.

The Development Finance Group within the SBP steers implementation of policy, legal and regulatory framework for access to finance for small and micro enterprises, agriculture and rural finance, housing finance and Islamic finance. Appropriate delivery of credit to the productive sectors helps in promoting economic growth while generating the required employment and reducing poverty.

SBP conference will focus on discussions surrounding a range of issues that are impeding access to financial services and it will cover different sectors including micro, small, agricultural enterprises and housing finance. To resolve these issues, SBP has been working in each of these areas to develop policy, legal, regulatory and institutional framework with the support of all stakeholders in respective sectors. In developing policy framework, the SBP has taken a number of initiatives ranging from encouraging banks to enhance their outreach and to deliver specialized services, while establishing alternative financial institutions including microfinance banks. The SBP has also created a regulatory framework for branchless banking representing a cost-effective alternative delivery channels including retail agents and mobile phones.

While these initiatives represent great strides forward, the challenges to alleviate poverty persist on. However, policies that promote inclusiveness can provide people opportunities of smoothing consumption and entrepreneurship. Each individual's prosperity contributes to the country's progress.

In order to ensure further strengthening on its initiatives, the State Bank will facilitate intellectual discussions at the conference on the upcoming challenges that financial system is likely to confront. Policy makers, practitioners and academics will share their perspectives in a bid to explore new market frontiers and innovations.

CREDIT DEMAND GROWS IN AGRICULTURE

The food price hikes both at local and international fronts have generated a spark in the farming sector where demand for more credit is quite visible these days.

Disbursement of credit to the agriculture sector by commercial and specialized banks has shown an impressive growth of 30.39 percent year-on-year basis during the first eleven months (July-May) of the current 2007-08 fiscal year.

Banks have disbursed a combined total of Rs 184.892 billion to the agriculture sector during July-May period as compared to Rs 141.798 billion in the same period last year, showing an absolute increase of Rs 43.09 billion.

Overall credit disbursement by five major commercial banks including Allied Bank Limited (ABL), Habib Bank Limited (HBL), MCB Bank, National Bank of Pakistan (NBP) and United Bank Limited (UBL) stood at Rs 85.584 billion during the first eleven months of the current fiscal year, compared with Rs 68.029 billion during the corresponding period last year, depicting an increase of Rs 17.56 billion in absolute terms or 25.81 per cent.

Zarai Taraqiati Bank Limited (ZTBL), the largest specialized bank, has disbursed Rs 56.072 billion in July-May period, compared with Rs 47.003 billion last year, while disbursement by Punjab Provincial Co-operative Bank Limited (PPCBL) stood at Rs 4.338 billion, compared with Rs 5.978 billion last year. Besides, 14 domestic private banks (DPBs) also loaned a combined Rs 38.898 billion during July-May period, up 87.11 percent when compared with Rs 20.788 billion disbursed last year.

It may be recalled that the State Bank of Pakistan has set an indicative target of Rs 200 billion for the current fiscal year, up from Rs 160 billion in the last fiscal year, showing an increase of Rs 40 billion. During the last fiscal year, commercial and specialized banks had disbursed a total of Rs 168.83 billion to the agriculture sector.