Pakistan: Orix Leasing to tap Islamic finance market
KARACHI: Orix Leasing Pakistan Limited (OLPL) plans to tap the high growth Islamic finance market.
The company has chosen an innovative way to attain its objective. It has entered into a non-binding Memorandum of Understanding (MoU) with Standard Chartered Bank (Pakistan) Limited (SCBPL) with regard to a prospective merger/amalgamation of Standard Chartered Leasing Limited (SCLL), a subsidiary of SCBPL with and into OLPL or acquisition of SCBPL’s 86.45 per cent equity stake in SCLL.
The MoU further provides the acquisition of SCBPL’s 100pc stake in Standard Chartered Services of Pakistan (Private) Limited and acquisition of SCBPL’s 20pc stake in Standard Chartered Modaraba.
The Orix company Secretary Effat Assad went on to state: “This stake is held 10pc directly and 10pc indirectly through SCSPL”.
Yet he cautioned that there was no certainty that the MoU would result in a binding transaction.
“The transaction structure and implementation plan would be subject to: due diligence of SCLL, SCSPL and SCM by OLPL which would commence shortly,” the company secretary informed and added that the MoU would result in binding transaction also after all necessary regulatory clearance for the approved structure; execution of definitive transaction agreements and satisfaction of various conditions, including regulatory and corporate approvals contained in the definitive transaction agreements.
A source in the knowledge of the proposed deal said: “Orix Leasing which caters mainly to smaller cities and Small and Medium Enterprises (SMEs) is vying to get a piece of the action in Islamic finance market.”
He stated that it was a prudent move in many ways. “The SCBPL will add value to OLPL while the Standard Chartered Modaraba, being a multi-purpose modaraba, would give access to Orix in several Islamic instruments, such as Ijarah, Musharaka and others,” said this person, though he hastened to add that it must not be construed to mean that the current business of Orix Leasing is un-Islamic.
The proposed merger with SCBL owned leasing and Modaraba would provide Orix the opportunity to enter businesses that already has a ready network and professional staff, he argued and pointed out that Modaraba sector also enjoyed the benefit of zero tax when 90pc of the profit was distributed to the stakeholders.
The source, who asked not to be named for he was not authorised to speak for Orix or SCBPL, believed that the Standard Chartered Bank had decided to spinoff the Leasing and Modaraba so as to concentrate in the core business of banking.
The board of directors of Orix Leasing also announced results for the financial year ended June 30, 2014 posting profit after tax (PAT) at Rs516 million, translating into earning per share (eps) at Rs6.29. It represented a giant leap of 53pc from PAT at Rs338m and eps at Rs4.12 the previous year.