KARACHI, Jan 9: It is unfortunate that not a single shareholder came forward to subscribe to the Sigma Leasing Corporation Limited’s issue of 5 million right shares in the ratio of one-for-two (50 per cent). All of the shares valued at Rs50 million were picked up by the sponsors, who were underwriters to the issue. The apathy of the shareholders is surprising since the offer was at discount of 30 per cent (at Rs7 per share) and Sigma is a profitable company that has disbursed a stream of cash dividends: at 20 per cent for 1999 and same for 2000. For the latest year ended June 30, 2001, the board also distributed cash at 7.5 per cent.

But the investors’ disenchantment with the leasing sector as a whole is manifest in that fewer than five of the 31 listed leasing scrips are currently trading at above their par value of Rs10; though numerous are earning well and making out substantial payout to the shareholders.

Under the Leasing Companies (Establishment & Regulation Rules, 2000, deficient leasing companies are now required to raise their paid-up capital to Rs200 million by end-December 2002. Sigma had sought approval of the Securities and Exchange Commission of Pakistan for issue of shares at 30 per cent discount, in two tranches. Now that the first tranche has received cool response from the shareholders, are the sponsors, going to go ahead with the second tranche? All of the equity in the company is vested in 176 individuals. No financial institution or bank or insurance company has stake in Sigma Leasing.

For the year ended June 30, 2001, the company posted profit amounting Rs11 million, which represented 55 per cent drop from Rs24.3 million the previous year. Pre-tax profit at Rs12.3 million, was almost half that of the year ago profit amounting to Rs24.6 million. “The reduced Return on Equity for the year, as compared to last year, was largely due to the fact that sound leasing opportunities were not available for most part of the year”, directors said, adding that it was only in the last two quarters that opportunities came and the company took advantage of them.

Net investment in leases increased by about 30 per cent during the year, which stood at 182.1 million at end-June 2001, from Rs102.2 million at the same time in 2000. Directors stated that the company had exercised utmost care in analysing the overall risk of clients before disbursements, in order to keep the overall quality of portfolio at the highest level. They claimed that overdues position of the company’s lease portfolio was amongst the lowest in the leasing sector; recovery being 99.99 per cent with just 0.01 per cent overdue and no rescheduling in the year under review. Asset exposure showed that 80.5 per cent was in machinery; 14 per cent in vehicles and 5.5 per cent in equipment. During the year, the company redeemed 10 per cent of the Rs110 million TFCs that were floated in January 2000. Another 10 per cent was redeemed in July 2001.

Lease income for the year ended June 30, 2001 improved 10 per cent to Rs44.1 million, from Rs40.2 million the previous year. Total income was about the same at Rs49.1 million, while aggregate expenses rose 54 per cent to Rs36.9 million, from Rs24.4 million, which mainly reflected increase in financial charges to Rs26.4 million, from Rs20.1 million.

Tangible fixed assets stood at Rs36.5 million and long term investments were Rs22.0 million. The company carried cash and bank balances of Rs20.9 million at year-end.

Against the market price of Rs8.72, the share in Sigma Leasing carried the book value of Rs12.89. Current ratio stood strong at 1.6:1.

Looking ahead, directors said the company would continue to increase reliance on lease financing for asset acquisition, which they said was the most easily available option specially due to substantial reduction in availability of industrial finance by DFIs. For the year 2002, the company was stated to be targeting increase in balance sheet size by 25 per cent in lease portfolio and other earning assets. Total balance sheet footing at end-June 2001 stood at Rs401.5 million.