FIRST HABIB MODARBA
S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
June 29 - July 5, 2009
First Habib Modarba (FHM) commenced its business operation in March 1985, with initial capital of Rs25 million only. Currently, the FHM has a total equity base of over Rs2.80 billion and an asset size of approx of Rs.4 billion.
FHM is a multipurpose Modaraba involved in various Islamic Financial Services like Ijara, Morabaha, Diminishing Musharakah, Salam, Istisna and various other Islamic Financial Products. FHM is also maintaining "A" category credit rating since almost last 10 years. PACRA has awarded FHM with rating scale of "A1+" for short term and "AA" for long term.
NINE MONTH ENDED
MARCH 31, 2009 (RS)
MARCH 31, 2008 (RS)
Operating Income 1,262,050,798 1,246,154,449 Admin Expense 39,953,972 36,178,180 Profit Before Tax 159,266,224 182,619,198 Taxation - - Profit After Tax 159,266,224 182,619,198 Earning Per Certificate 0.79 0.91 Source: FHM
During the period under review, global financial and economic turmoil continues unabated. According to revised IMF forecast issued on March 19, 2009, global GDP growth in 2009 would be negative while the IMF has lowered its 2010 growth forecast. During the quarter January-March, 2009 after a long gap the current account deficit, a major economic indicator has presented a positive indication. With this decline in the current account deficit, the average deficit has also narrowed down to $7.645 bn in the first nine months as compared to $9.627 bn in the same period of last fiscal year.
At the same time, the foreign exchange reserves are also maintaining on satisfactory level after IMF and other institutional supports. It is expected that reserves will improve further as the friends of Pakistan has pledged a great support to stabilize Pakistan's economy. In the monetary policy of SBP, announced on 20th April, 2009 the SBP has slashed discount rate by 100 basis points. It is a good move by the Central bank and it will support for reduction in cost of finance by the businesses to some extent.
However, still discount rate is very high and it should be brought down further.
Karachi Stock Exchange (KSE-100 Index) witnessed a recovery of 17% during last three months at a time when the performance of regional markets remained sluggish. Due to reduction in discount rate, it is expected that the market will further improve.
FHM is a leading financial services organization providing a diverse range of Islamic financial services to individuals and customers. FHM's marketing strategy is meant to reach Shariah-complaint clients and make them aware of range of innovative Islamic products and services. With the varied and diversified expertise of the management, FHM has gained an comparable wealth of experience and knowledge of Pakistan's financial, industrial, and commercial markets. FHM has been penetrating a sizable volume in current market by providing Islamic financial products such as Ijara, Morabaha, Musharakah and Certificate of Musharakah.
Presently, there are 24 operative Modarabas in Pakistan. Out of 24 Modarabas, 18 Modarabas have paid cash dividends between the range of 2.5% to 65% and two Modarabas have declared Bonus shares to their Certificate-holders. First Imrooz Modaraba declared highest cash dividend of 65% having an Earning per Certificate (EPC) of Rs. 8.33.
First Habib Modaraba declared 20% cash dividend and 100% right shares at a premium of Rs.2.50. Standard Chartered Modaraba also paid a cash dividend of 15% and 5% Bonus shares to their certificate holders.
(Rs. in million)
INDICATORS 2003 2004 2005 2006 2007 No. of Management Companies 30 30 27 24 24 No. of Modarabas 32 32 28 25 24 Total Equity 7,854 8,401 9,233 10,062 10,821 Total Assets 15,852 17,574 21,131 23,736 26,009 Total Income 4,235 4,140 3,939 5,025 5,200 Leasing Income 3,125 3,066 2,966 3,082 3,997 Musharaka and Morabaha Income 351 271 323 410 504 Miscellaneous and Other Income 759 803 650 1,533 699 Net Profit after Tax 1,072 956 794 811 749 Assets Leased Out 6,335 7,101 5,751 6,153 6,696 Net Investment in Lease Finance 856 1,067 3,315 3,481 3,861 Current Portion of Lease Finance 23 103 1,905 1,950 1,671 Various sources
Total assets of the Modaraba sector were Rs. 26,009 mn in 2007 as compared to Rs.23,736 mn in the preceding year, depicting an increase of Rs.2,273 mn i.e. 9.6%. The total assets of First Habib Modaraba crossed Rs. 5 bn, which is a milestone in the growth achieved by any modaraba. The total cash and stock dividend distributed among the certificate holders stands at Rs.575 mn, which constitutes an average of 9% of the paid up capital of the modarabas.
FHM is one of the best Islamic financial services institutions within the non-banking sector in Pakistan. FHM has always given emphasis on building up quality lease portfolio. FHM's business strategy and prudent risk management policies have supported the management to maintain outstanding assets quality while ensuring sustainability of performance, despite the increasingly competitive operating environment in Pakistan's financial market.