The NIT announced the results of all funds under its management for the half year ended Dec 31, 2011, showing the NIT-SEF to have outperformed the KSE-100 index by 4.5 per cent in the half year. - File photo

KARACHI: The National Investment Trust (NIT) has received “in principle” the government’s approval of extension in sovereign guarantee to debt given by financial institutions amounting to Rs17.2 billion for setting up the NIT-State Enterprise Fund (NIT-SEF).

The NIT-SEF was launched three years ago in January 2009 to calm the Pakistan stock market, which had evidenced a downward spiral, from 15,000 to around 6,000 points on the KSE-100 index.

The State Enterprise Fund was launched with Rs17.2 billion, raised through borrowings from NBP, EOBI, SLIC and a consortium of banks.

The lending was underlined by sovereign guarantee of the government for a three-year period. That time expired on Dec 31, 2011.

On queries, the Chief Operating Officer (COO) at NIT, Manzoor Ahmed, on Wednesday, re-enforced the assurance already given by Wazir Ali Khoja, Chairman and Managing Director of NIT earlier in the year that the NIT-SEF would continue to play its role for which it was created to support the stock market.

Mr Manzoor said that the Ministry of Finance would furnish the written signed and sealed guarantee papers after its routine pass through from the Economic Coordination Committee (ECC).

“The next meeting of the ECC is likely to take up the matter,” he said. About the lenders, the NIT’s Chief Operating Officer said that all but one had furnished their written consent for extending the loan for two years.

He said that NIT had serviced the debt promptly all through the past three year years.

The rate of interest was Kibor plus one. One lending party that was still being pulled up on board was asking for more.

He said that the NIT–the country’s largest mutual fund with Rs80 billion under management — held Rs27 billion under the NIT-State Enterprise Fund, the growth representing around Rs10 billion in “unrealised gains.”

The particular Fund was largely invested in eight state-owned entities, including Oil and Gas Development Company; Pakistan State Oil; Pakistan Petroleum Limited; Sui Northern Gas Pipelines; Sui Southern Gas Company; Kot Addu Power Company; National Bank of Pakistan; and Pakistan Telecommunications Company Limited.

The NIT MD had earlier reassured the market that there was no possibility of an impending heavy sells off by NIT to pay the loans obtained for launching of NIT-SEF.

Analysts said that though there still remained slight concerns in the market, which could be dissipated once the government offers its extension in black and white, the fact that a heavy sell off by the Fund in stocks with heavy weightage, to pay debt would not make business sense even for the government.

It would cut down the value of companies in which the state itself holds the highest stake. And such a sell-off could send stocks reeling down, hurting all stakeholders including the SEF lenders.

The NIT announced the results of all funds under its management for the half year ended Dec 31, 2011, showing the NIT-SEF to have outperformed the KSE-100 index by 4.5 per cent in the half year.

The Net Asset Value decreased from Rs84.21 (ex-dividend) from June 30, 2011 to Rs80.25 on Dec 31 compared to fall of 9.19 per cent in KSE-100 Index.

During the period under review, the Fund earned a net profit of Rs2,027 million (without impairment loss) against a net profit of Rs2,061 million earned in 1HFY11.

The fund realised capital gains of Rs491 million and earned a dividend income of Rs449 million in 1HFY12 compared to capital gains of Rs479 million and a dividend income of Rs437 million in 1HFY11, showing a growth of 2.5pc and 2.7pc, respectively, over the corresponding period last year.