It could be termed swift surgical operation by the new management as it has lifted the ailing Financial Link Modaraba (FLM) from ruins within one year. One has to take simply a glimpse of performance statistics of the Modaraba appended with this column to heave a breath of comfort emanating from its turnaround.
During the period under review it has garnered short term finance from short term borrowings and Musharika arrangement and the same have been employed for short term assets in order to generate "fast buck" and at the same time avoid mismatch between borrowing short and lending long.
FLM has started three pronged profit centres - trading income, income from placements etc, and lease rental incomes.
However these appear to be seed money for sustainable income for long term. The indications are that for some time in future income from trading and Musharika arrangements will remain for quite some time the mainstay of the profitability.
The Modaraba booked net profit after taxation at Rs 8.08 million (2002-03 loss Rs 1.05 million). Financial Link Modaraba, (FLM) was formed under the Modaraba Components and Modaraba (Floatation and Control) Ordinance 1980 and Rules framed thereunder.
Its management company is Financial Link Limited a public limited company incorporated in the province of Punjab. Its registered office is located at 4th Floor, Crescent Standard Tower 10-B, Block E-2 Gulber III Lahore.
FLM was listed at Karachi Stock Exchange (KSE) in 1994. The FLM shares is placed on the Defaulting Companies List under the KSE's listing rule 32(1)D which stipulates that "Quoted below 50% of face value for a continuous period of 3 years."
The Modaraba (FLM) is a multipurpose and perpetual Modaraba and can engage in venture capital, trading, equity investment, Musharika/Morabaha financing arrangements and financial advisory services. It has been reported that during the year, the Registrar of Modaraba Companies and Modaraba has approved change of management of Financial Link Ltd (FLL) subject to the condition of injection of Rs 30 million within one month and Rs 70 million after one year from the date of approval.
Consequent upon the approval, the Board of Directors of FLL has been replaced by those nominated by the Crescent Standard Business Management (Private) Ltd and the new management also deposited Rs 40 million with the Modaraba (FLM) against future issue of Modaraba Certificates.
The change in management has brought a new look in the operation signifying substantial improvement.
Glaring improvement in the operating and financial results from the performance statistics which are appended with this write-up. In the preceding year accumulated loss had reached Rs 100.45 million which exceeded the paid-up capital of Rs 100 million. Above the balance sheet footing expanded from merely Rs 1.65 million to Rs 424.61 million.
Gross Revenue was recorded at Rs 23.40 million as against Rs 0.09 million generated in the preceding FY 2002-03. The company has succeeded in garnering substantial finances on the short term basis which have been used for short term assets to avoid mismatch.
On the current liabilities side, short term borrowings amounted to Rs 83.30 million and funds received under Musharika Arrangements were in the sum of Rs 264.52 million. The short term facilities carry mark up at the rates of 10.5% to 11% per annum.
These are secured against funds placed with the same financial institution.
As regards placements the Modaraba has signed a Memorandum of Understanding with a financial institution under which all deposits received by the Modaraba under Musharika arrangements are placed with financial institution which shall invest the same in profitable projects.
Profit rates on Musharikas range from 8% to 12% per annum. The Modaraba is entitled to annual service fee at the rate of 0.25% of the amount placed.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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June 30
2004 2003
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Certificate Capital-paid-Up: 100.00 100.00
Statutory Reserve: 3.43 1.81
Accumulated (Loss): (93.98) (100.45)
Certificate Holders Equity: 9.45 1.36
Deposits Against
Modaraba Certificates: 40.00 -
L T Deposits: 0.42 -
Current Liabilities: 378.67 0.29
Fixed Assets Tangible: 3.93 0.01
Current Assets: 424.61 1.64
Total Assets: 428.54 1.65
Trading Income: 14.79 -
Income From Placements/Musharika
/Morabaha Arrangement: 7.48 0.02
Lease Rental Income: 0.38 -
Dividend Income: 0.02 -
Gain On Re-measurement
Of Investments: 0.24 0.03
Other Income: 0.49 0.04
Gross Revenue: 23.40 0.09
Operating (Expenses): (1.93) (1.14)
Financial Charges on Short
Term Borrowings: (4.04) -
Total (Expenses): (5.97) (1.14)
Modaraba Company's Management (Fee): 1.74 -
Profit/(Loss) before Taxation: 15.69 (1.05)
Profit/(Loss) After Taxation: 8.08 (1.05)
Earning/(Loss) Per Certificate (Rs): 0.65 0.11
Financial Ratios:
Book Value Per Certificate (Rs): 0.95 0.14
Debt/Equity Ratio: 0:100 0:100
Current Ratio: 1.12 5.65
Net Profit/Total Income (%): 34.53 (-)
R O E (%): 85.50 (-)
R.O.A. (%): 1.88 (-)
R O C E (%): 16.20 (-)
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