KARACHI, April 30: Pakistan Industrial Credit & Investment Corporation Limited (PICIC) claims to be the largest private sector development finance institution with an equity of Rs1.9 billion — that it says is set to cross Rs2 billion by the end of June this year.

The Corporation posted after tax profit at Rs213 million for the nine months to end-March 2002. The sum included taxed profit of Rs28.4 million for the third quarter 2002 (3Q02).

Comparable figures for the nine months of 2001 and 3Q01 stood, at Rs 183.1 million and Rs 37.8 million, respectively. PICIC was established in the fifties by local and foreign investors in collaboration with the World Bank. The aim: to provide development finance to the private sector. The Corporation boasts of having financed as many as 1,199 industrial units all over the country, with gross assistance of Rs35.2 billion.

PICIC did well until the early nineties, when it fell upon bad times. Due to increased infected portfolio, strained liquidity and growing establishment costs, it plunged into losses. At June 30, 1996, PICIC was carrying Rs1,371 million as accumulated deficit on its balance sheet. Managing Director Mohammad Ali Khoja who took over the reins from July 1996, has, therefore, all the reasons to claim credit for the subsequent turnaround.

The Corporation returned to profitability in 1997 with operating earnings of Rs151 million. Tasks of recovery from project loans were assigned to recovery teams and cases pending in various courts were pursued. As a result of settlement of cases through or outside court, the Corporation says it has made cash recoveries during the past five-and-a-half-year, amounting to Rs17.2 billion i.e Rs3 billion a year.

That has helped resumption of term lending and the start of lease financing business. On February 26, 2001, PICIC acquired 60 per cent shares with management control of the former Gulf Commercial Bank Limited and converted it into PICIC Commercial Bank Limited.

The Bank encompasses all areas of operation, including import/export financing; agriculture loan; small and medium loans to projects; financial advisory services and capital/money market operations.

For financial year 2002, PICIC’s target is to provide long-term project financing to the tune of Rs3 billion; last year it had approved Rs2.1 billion on that account.

The Corporation claims to be the only development finance institution, at present, that is providing long-term financing. In terms of working capital financing, PICIC sanctioned Rs1.2 billion in 2001 and holds target of Rs1.5 billion for the current year. Lease financing is a new field in which PICIC has entered only recently.

It has approved lease financing of Rs1.2 billion with the 2002 target set at Rs1.5 billion. During 1989, the Corporation also diversified its business activities by entering into merchant banking with deposits increasing by 6.2 per cent to Rs3.7 billion at end financial year 2001. PICIC also sold 33 sick industrial units, out of which 13 projects are now operative. Pacra has assigned “A-” (Single A Minus) long-term and “A2” (Single A Two) short-term entity rating to PICIC.

The Corporation says that to supplement its capital market/ fund management activities, it has plans to acquire or establish Asset Management Company. PICIC is one of the four prospective bidders for controlling stake in NIT (Pakistan’s largest mutual fund with 20 billion in assets). Other three in the run are: ABAMCO, Arif Habib Securities and the First Habib Modaraba.

PICIC is listed on the KSE with the current quotation of its stock at Rs19; break-up value worked out at Rs25.87 on December 2001. The Corporation had distributed cash dividend at 12 per cent tied to a stock bonus at 15 per cent for 2001.

At the last count on June 30, last year, some 2,221 individuals had aggregate stake of 11.3 per cent in PICIC; institutional investment was considerable with 15 insurance companies holding 32.5 per cent and 36 financial institutions with 35.2 per cent shares. Nearly 9 per cent holding was vested in foreign shareholders.