KARACHI, May 8: The Board of Directors of Sigma Leasing Corporation Limited announced on Tuesday that it proposed to issue 5 million right shares at Rs 7 each.

The Board’s attempt to raise Rs35 million (Rs50 million at par) in right offer, one-for-three shares at discount of 30 per cent, was considered by the market as a bold move, for the company’s earlier identical offer at 50 per cent (one-for-two) had received, all but cool investors’ response.

Not a single shareholder had stepped forward to subscribe to the company’s last offer of right shares and all of the stock valued at Rs50 million were picked up by the sponsors, who had themselves underwritten the issue. But in doing so, the sponsors managed to raise the paid-up capital to Rs150 million, from Rs100 million and also retain control over the company.

Under the Leasing Companies (Establishment & Regulation Rules, 2000), all leasing companies are required to raise their paid-up capital to Rs200 million by end-December 2002.

In order to come up to the requirement, Sigma Leasing Corporation, which held Rs100 million in paid-up capital, had sought the approval of Securities and Exchange Commission of Pakistan for the issue of 10 million shares of Rs10 each, at 30 per cent discount, in two tranches. The latest offer of Rs50 million in right would take the paid-up capital of the company to the minimum required level of Rs200 million. The Board’s decision of Tuesday is subject to the shareholders’ approval at the general meeting scheduled for June 3.

There would hardly be a hurdle in the passing of special resolution at the shareholders’ meeting, for including the last 5 million right shares, sponsors/directors must hold an overwhelmingly huge aggregate stake in the company. At the last count on June 30, 2001, it was noted that all of the shareholding in the company was vested in 176 individuals. No financial institution or bank or insurance company was a shareholder in the company.

The Board also announced on Tuesday an interim cash dividend at Rs0.50 per share, i.e at 5 per cent. The apathy of the shareholders to the previous right offer could appear to be surprising since the company is profitable and it has disbursed a stream of cash dividends: at 20 per cent for 1999; same for 2000 and 7.5 per cent for the year ended June 30, 2001.

But more than the company itself, the investors’ disenchantment looks like to be with the leasing sector as a whole for fewer than five of the 30-odd listed leasing scrips are currently trading at prices above their par value of Rs10; though numerous are earning well and making out substantial payout to the shareholders.

For the year ended June 30, 2001, Sigma Leasing posted profit amounting to Rs11 million. The company’s net investment in leases increased by about 30 per cent during the year, which stood at Rs182.1 million at end-June 2001, from Rs102.2 million at the same time in 2000. Directors claimed that overdues position of the company’s lease portfolio was amongst the lowest in the leasing sector; recovery being 99.99 per cent. Asset exposure showed that 80.5 per cent was in Machinery; 14 per cent in vehicles and 5.5 per cent in equipment.

Tangible fixed assets of the company stood at Rs36.5 million at June 30, 2001 and long term investments were Rs22 million. The company carried cash and bank balances of Rs20.9 million at year-end.

Against about 50 per cent discount in the market price, the share in Sigma Leasing carried the book value of Rs12.89 at end-June last year. 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.

Directors stated on Tuesday that the company would release financial projections for three years in due course. Share transfer books would be closed from May 28 to June 3 (both dates inclusive) for the entitlement of cash dividend and right shares.