Operations and Working of PICIC
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Preface
This report gives a detailed overview regarding the operations and working of picic.
First
of all we have given the introduction and background of the
organization than moved to the objectives, its structure and financial
policies are discussed in detail. Also the lending procedures, income
sources, which is necessary because it helps in knowing the routes of
their lending and borrowing some general topics are also discussed in
this part. We have given financial reports of past ten years, which
includes its income, expenses, assets, and capital. We have also given
the procedure of application.
Introduction:
With
pioneer role of financing industrial projects in Pakistan, PICIC will
Continue its core business of long term financing besides assisting
industrial and commercial sectors through matrix of financial products
like long term loans to new as well as balancing, modernization and
replacement projects, working capital loans, syndication, underwriting,
leasing, equity investment and related financial services. PICIC is
firmly committed to keep the industrial wheel moving through development
of enterprises within private sector by encouraging, sponsoring and
facilitating participation of private capital. One of the first
Development finance institutions established with the World Bank Group
assistance in 1957. Since then, it has been actively playing its due
role towards economic development of the country. PICIC is primarily
engaged in catering to the financial needs of large and medium size
industrial projects in the private sector, this assistance is provided
within the framework of the industries, which are covered under the
Industrial Investment Schedules issued by the Government from time to
time.
Picic’s corporate theme would be participation in the economic prosperity of Pakistan,
pursuing all banking and investment related activities, quality
standards, maintaining the financial viability, developing a
professional work force and promoting environmental consciousness.
PICIC
guarantees and counter-guarantees loans and obligations, arranges
participation of local and external finance from private and
institutional investors. It also assists creation, issue or conversion
of capital in any form and for that matter it functions as a trustee. In
addition to this, picic undertakes to provide managerial and technical
advise to the industrialist for promotion of industries. It also aims at
broadcasting the base of industrial ownership in the country and there
by develop the stock market.
Objectives
The main objective of picic is to assist the private sector of industry in Pakistan
by giving long term and medium term-loans in foreign as well as local
currencies. It provide assistance generally for acquisition of fixed
assets. It does not, however provide loan for working capital or where a
refunding operation is contemplated. Picic
assists in making direct participation in shares, debenture stock and
underwriting public issues of shares and other securities.
Picic
is assisting Pakistani entrepreneurs to obtain suitable foreign
investment in their enterprises and in conversely assisting foreign
investors to locate suitable opportunities for investment in Pakistan.
It provides sufficient funds to entrepreneur in the preparation of
investment proposals and gives financial, technical and managerial
advice to the industries which have been financed and helped by it.
The
scope of the finance assistance given by picic to the industrial
enterprises is fairly wide. It tries to assist entrepreneur at the
stage. When the project are first conceived, at the implementation stage
and finally up to the operational stage of projects. It also keeps a
close and watchful eye on the projects during the period of
implementation and also after the project have been commissioned in
order to ensure thei4r satisfactory operation. In case of any financial
or technical problems, picic promptly takes appropriates remedial steps.
Ownership
PICIC
is managed by the Board of Directors elected from private sector,
institutional shareholding and the nominees of foreign shareholders and
the Federal Government. The ratio of private and public sector
institutions' shareholding in the capital of the corporation is 54.70%
and 45.30% respectively. Their composition is as follows:
No. Of Shareholders No. Of Shares Percentage (%)
General Public 2,802 29,185,396 45.55
Private (Foreign) 35 5,864,902 9.15
Public Sector Corporations 14 29,017,247 45.30
Board of Directors
PICIC is managed
by a Board of Directors with representation of the American and
Japanese shareholders and 1 representing the Federal Government. The
Board of Directors, which is the highest policy making body of PICIC,
consists of elected directors from private sector and nominees of the
institutional and foreign shareholders. The Board of Directors elects
the Chairman and the Board appoints the Managing Director who is the
chief executive. The Board deals with all policy matters and
applications involving financial assistance up to the maximum lending
limit which is 20% of Picnic’s total net worth both in foreign and local
currencies. The Board's Executive Committee, comprising of seven
Directors, deals with matters other than those involving policy and
applications for financial assistance up to 20% of Picnic’s total net
worth.
The following gentlemen, presently comprise Picnic’s Board of Directors:
1.Mr. Khursheed K. Marker (Chairman)
2.Mr. Altaf M. Saleem (Deputy Chairman)
3.Mr. Zahid Bashir
4.Mr. S. M. Rafiq Akhtar
5.Mr. Mohammed Basheer Janmohammed
6.Mr. Mohammad Yasin Lakhani
7.Mr. Istaqbal Mehdi
8.Mr. Rasool Bakhsh Baloch
9.Dr. Amjad Waheed
10.Mr. Jahangir Siddiqui
11.Mr. Kamal Afsar
12.Mr. Muhammad Latif
13.Prince Abbas Khan (Representing Federal Government)
14.Mr. Masanori Okuda (Representing Japanese Shareholders)
15.Mr. Muhammad Ali Khoja (Managing Director)
Managerial Strength
The activities
of picic are guided and supervised by a board of directors which
consists of 20 members, including the managing director, 12 directors
including chairman of the board representing Pakistani share-holders,2
members of the government of Pakistan and the provincial governments and
5 foreign shareholders including one representative of I.F.C. each
province is represented on the board by rotation for a period of one
year. The board of directors and managing directors, who is also, the
chief exective of the corporation, is appointed by the board, elects the
chairman. The usually meets four times a year. The board has delegated
some of its powers to the executive committee, which consists of 10
directors, including the chairman and the managing director. All loans
and assistance are sanctioned in a meeting of directors. The executive
committee has the power to consider the projects requiring assistance up
to Rs. 5million.
PICIC
is equipped with very strong and experienced human resource structure
consisting of financial/investment analysts, marketing
experts/economists, engineers, cost accountants, financial accountants
and legal experts. PICIC has traditionally been hiring individuals from
renowned educational institutions and professionals with rich work
experience so as to have a superior blend of experts and strategists to
manage the affairs of the Corporation. Picic’s staff turnover is
comparatively low which shows the compensation policies to hold
competent work force according to their professional caliber. PICIC
continues to pay special emphasis on the training of its professional
staff and avails to the maximum possible extent the training
opportunities offered by the World Bank, ADB, ADFIAP, ADFIMI, etc. along
with training programs available within Pakistan.
Members of Picic’s senior and middle management comprise the following gentlemen:
Head Office
Muhammad Ali Khoja
Managing Director
Saifullah Khan
Deputy Managing Director
M.Bilal Sheikh
Deputy Managing Director
Syed Nasim Raza
Senior Executive Vice President
Zainul Abidin Memon
Senior Executive Vice President
Syed Zafar Saeed
Executive Vice President
Saleem Akhtar
Executive Vice President
Ashfaq Saeed
Executive Vice President
Muhammad Rafiq
Executive Vice President
S. A. Dharejo
Senior Vice President
Administration Department
Abu Bakar Siddiqui
Senior Vice President
Real Estate Department
Ismat Anono
Senior Vice President
Banking Operation Division
Tehsin A. Mahmudi
Senior Vice President
Assets Management Department
M. Salim Gadit
Senior Vice President
Accounts Department
Mahmood Ahmadani
Senior Vice President
Settlement Department
Hazoor Bux Jatoi
Acting Senior Vice President
Credit Department
Zaheer A. Memon
Acting Senior Vice President
Resource Mobilization
PICIC has a strong financial base with authorized capital of Rs. 1,000 million and paid-up capital of Rs. 640.675 million as on June 30, 2000.
Besides share capital, Picic’s resources are derived from borrowings,
both in foreign and local currencies. Borrowings in local currency
include borrowings from the Government of Pakistan and State Bank of Pakistan. The loans from the State Bank of Pakistan
include facilities for financing the purchase of locally fabricated
plants and machinery. Government of Pakistan Rupee Loans are
subordinated to the share capital of PICIC so as to broaden its equity
base for
Borrowing purposes. Loans in
foreign currencies are provided from international institutions such as
the World Bank, Asian Development Bank and other lending agencies
including KFW and DEG of Germany
and FMO of Netherlands. Islamic Development Bank has also provided a
Line of Equity to PICIC. All these funds are untied. From time to time
the Government of Pakistan also makes available to PICIC, loans from a
number of countries that are generally tied to the purchase of machinery
from the respective countries such as Switzerland, UK, Germany, etc. For meeting its financing requirements PICIC also mobilizes funds through its various deposit
Schemes in the local market.
Picic resources are derived from borrowing in local and foreign currencies. The former include loans from the government of Pakistan and state bank of Pakistan. The United States
agency for international development (AID) granted loan of Rs.30m in
1967. Loans in foreign currencies are received from international
institutions, e.g., the World Bank and Asian development bank.
Government also arrange loans for picic from a number of countries.
These loans are generally tied to the purchase of machinery from the
respective countries.
Capital Market Operations
PICIC also plays a key role in capital market development through direct purchase and
Underwriting of shares. PICIC as of June 30, 1999
held an investment portfolio of Rs. 822 Million. The issuance of
debentures also falls within Picic’s functional preview whereas direct
equity financing is also one of the active modes of Picic’s project
financing activities.
Merchant Banking
To meet the growing challenge of time and to expand its contribution towards the industrial development of Pakistan,
PICIC diversified its activities in 1989 beyond the traditional
engagement in project financing area. The diversified activities in the
area of Merchant Banking include mobilization of local and foreign
currency funds, working capital financing, import/export business, fund
management, lockers facility, etc.
Recoveries
Special asset management groups established in 1996 and reorganized in 1997 are active
in
managing the loan portfolio to accelerate the pace of recoveries. Due
to added emphasis on recoveries with special focus on stuck-up loans,
efforts were made to maintain the same level of recovery.
PICIC
recovered Rs. 2.907 billion during the financial year 1996-97 which
were not only 43% higher than Rs. 2.029 million recovered during the
previous year but were also the highest ever recovered in the history of
PICIC. Besides, SBP annual report of 1996-97 also confirmed that
Picic’s recoveries during the financial year 1996-97 were the highest
among all the DFIs. During 1997-98, PICIC recovered an amount of Rs.
2.911 billion which is the highest ever in the history of PICIC.
Maintaining the same pace of recovery, PICIC during the FY 1998-9
recovered Rs. 3.199 billion which is yet another record in series for
cash recoveries over it's history. Recoveries for the year ended June 30, 2000 have been recorded at Rs. 2.926 billion.
Operational Review
PICIC as a
pioneer financial institution enjoys excellent reputation among its
lenders, which has developed over a period of 40 years. However, due to
multidimensional crises faced by the local financial/industrial sector,
PICIC suffered losses during the years 1995-96. After the change in
Management in July 1996, new strategy was chalked out to revitalize
PICIC. This revitalization program has successfully been implemented
during the last three years. The Corporation has significantly improved
in terms of operational and financial performance.
Some of the major indicators supporting the operational achievements are as follows: -
ACHIEVEMENTS
As on June 30, (Rs. in billion)
1996 1997 1998 1999 2000
Loan Recovery (cash) 2.029 2.907 2.911 3.199 2.926
Income 1.738 1.945 2.078 2.525 1.482
Expenditure 2.037 1.794 1.635 1.349 1.171
Admin. Expenses 0232 0.178 0.166 0.240 0.197
Profit/(Loss) before
Diminution, tax & provisions 0.299 0.151 0.443 1.176 0.311
Project financings
Picic’s
major area of operations has traditionally been project financing.
PICIC has so far financed over 1,091 projects in various economic
sub-sectors which include, textile spinning, weaving and finishing,
sugar manufacturing, cement, food products processing and preservation,
leather and leather products, engineering and electronics, chemicals and
petro chemicals, mining, quarrying and processing, ceramics and glass,
etc. Since inception, PICIC has approved an amount of Rs. 27.5 billion
as financial assistance to the industrial sector.
Picic’s
loans are approved for periods normally ranging between 6 and 10 years
including agrace period of about two years. The maturity of each loan is
determined by the estimated repayment capacity of the enterprise
financed. Financial assistance made available by PICIC is always secured
and the normal security is fixed and floating assets of the enterprise
being financed. In case of private limited companies, in addition to
mortgages, personal guarantees of the directors of the company are also
required.. Besides directors of private limited companies are required
to provide additional collateral of the amount sanctioned. Picic’s
spread on financial assistance is normally 3% above the rate at which
the Corporation makes borrowings.
Presently
Picic’s minimum lending limit is Rs. 20 million for new projects and
maximum lending limit is equivalent to 25% of Picic’s net worth.
However, there is no minimum lending limit for expansion or balancing,
modernization and replacement projects.
Working Capital Financing
While realizing the multidimensional needs of the industrial sector, PICIC has also
commenced
financing of working capital requirements of industrial units. This is
also in line with the corporate strategy to facilitate a wide range of
facilities to its borrowers and at the same time enhance business
activity. Accordingly, during the past few years PICIC has provided this
facility to its borrowers.
Leasing
In a move towards assuming the role of a Universal Bank, PICIC has commenced leasing
Operations
from 1999. Leasing facility would benefit Picic’s existing clients
having a track record of utilizing PICIC assistance successfully in the
past and also inviting other successful business houses while offering
quality services.
Syndication
PICIC has long been
involved with arranging syndicated loans for industrial concerns with
large financing requirements like sugar, cement and power projects.. It
has also been active in co-financing the projects with international
lending agencies and local institutions for projects involving large
capital outlay.
Repayment Guarantees
In
order to maintain its profile as the development leader in industrial
financing, PICIC provides repayment guarantees to counterpart lending
agencies against financing e.g. PICIC as per subsisting arrangement
issues repayment guarantees to Islamic Development Bank against its
lease/equity financing in Pakistan.
Other Activities
Modaraba Company
Modaraba
Management Company has already been incorporated and clearance from
Religious Board of Pakistan for floatation of Modarabas has also been
obtained. PICIC Modaraba company would start operations after
finalization of internal procedures and manuals.
Commercial Banking
In
order to mobilize deposits in a big way and undertake various other
activities, PICIC has entered into commercial banking this year. Picic
has acquired controlling shares and management of gulf commercial bank
Ltd. After obtaining permission from state bank of Pakistan and approval of the ministry of finance, GOP. The acquisition being first of its kind in Pakistan is in line with the international merger trends and financial consolidation being pursued by the government of Pakistan.
With this acquisition both picic and gulf commercial bank pledge to
serve their patron clientele with even more dedication and commence a
wider range of banking services in the present dynamic business
environment.
Terms & Conditions
The principal terms and conditions, governing Picnic’s financial assistance are mentioned
Here under.
1. Financial Charges
a. Rate of Mark-up
i. Rate of Mark-up on local currency financial assistance, under LMM Scheme of
the State Bank of Pakistan, is subject to such terms and conditions as are laid
down by the State Bank of Pakistan.
ii. The rate of mark-up on foreign currency loans is determined depending upon
the rate of funds borrowed by PICIC.
iii. The pricing of working capital finance is worked out keeping in view the cost of
funds and the conditions prevailing in the money market.
b. Project Examination Fee:
Examination fee (non-refundable) as per following schedule is charged.
|
Fee
|
Financing Application
|
|
Rs. 50,000 (min)
| Less than Rs.100m |
|
Rs. 100,000
|
Rs. 100 million and above but less than Rs. 150 million
|
|
Rs.150, 000
|
Rs. 150 million and above but less than Rs. 200 million
|
|
Rs.200, 000 (max)
|
Above Rs. 200 million
|
c. Underwriting Commission/Fee:
In addition to project examination fee, underwriting commission and documentation fee
are charged @ 2.5% and 0.25% of the amount requested, respectively. Besides, take-up
commission @ 2.5% is charged on the amount to be taken up by PICIC in the event of
under-subscription of public issue.
d. Commitment Charges:
Commitment charges of 0.375% are levied from the date of draw down schedule provided
by the borrower.
2. Security Arrangements:
The
prime security required for approved financial assistance is first
equitable charge on all assets (except inventories) of the company
ranking pari passu with the charges already created in favor of other
long-term creditors. The main sponsoring directors directly managing the
affairs of the company (including the sponsoring Chief Executive) shall
provide personal guarantee to PICIC in the required form and substance
and to the entire satisfaction of PICIC. Besides, collateral/security
acceptable to PICIC may also be required keeping in view the nature of
the project and the degree of risk involved.
3. Other Terms
a. To meet a part of the cost of the project, PICIC may require sponsors to raise and
deposit some specified amount of money in an escrow account to be jointly operated by
sponsors and PICIC.
b. Anytime during currency of its financial assistance PICIC shall have the right to
appoint one director on the Board of Directors of the company.
c. In case of new public limited companies, PICIC may opt to convert 20% of its
originally sanctioned foreign currency loans into paid-up capital of the company at any
time during the subsistence of PICIC loans.
d. PICIC requires its borrowers not to declare any dividend during the period they are in
arrears in respect of payments against PICIC loans.
e. Financial ratios should be in accordance with the regulations laid down by the State
Bank of Pakistan and other foreign lending agencies, as the case may be.
f. Picic’s sanction/disbursement would be subject to SBP-CIB clearance/satisfactory
receipt of bank reports.
4. Utilization of Financial Assistance
Disbursements of funds sanctioned for the purchase of plants and equipments are made
against
letters of credit established by PICIC after the sponsors have
fulfilled all the terms and conditions of the loan. In case of
underwriting, direct equity participation and working capital finance,
disbursements are effected after the terms and conditions have been met
and the documentation completed. Legal and corporate formalities to be
fulfilled by the project sponsors depend upon nature, size and source of
financing. These normally include:
a. Incorporating the company in case of new projects.
b. Raising share capital as stipulated in the terms and conditions of approvals.
c. Arranging financial assistance from other institutions, if required.
d. Executing loan agreement.
e. Submitting security documents.
f. Procurement of machinery and equipment in accordance with the specified procedures
laid down by PICIC, State Bank of Pakistan and foreign lending agencies. The
procurement of imported machinery and equipment is based on international competitive
bidding
Income
Year I n c o m e (Rs. in million)
| |
From Operations
|
From Equity Trading
|
|
1988
|
634
|
94
|
|
1989
|
866
|
120
|
|
1990
|
1126
|
121
|
|
1991
|
1215
|
307
|
|
1992
|
1562
|
282
|
|
1993
|
1960
|
383
|
|
1994
|
2016
|
361
|
|
1995
|
1640
|
98
|
|
1996
|
1878
|
67
|
|
1997
|
1982
|
96
|
|
1998
|
2415
|
110
|
|
1999-2000
|
1333
|
149
|
Total Recoveries
|
Year
|
Rs. in million
|
|
1988
|
942
|
|
1989
|
1138
|
|
1990
|
1431
|
|
1991
|
1450
|
|
1992
|
1530
|
|
1993
|
1401
|
|
1994
|
1579
|
|
1995-96
|
2312
|
|
1996-97
|
2907
|
|
1997-98
|
2911
|
|
1998-99
|
3199
|
|
1999-2000
|
2926
|
Total Expenses
|
Year
|
Rs. in million
|
|
1988
|
563
|
|
1989
|
691
|
|
1990
|
1018
|
|
1991
|
1166
|
|
1992
|
1437
|
|
1993
|
1919
|
|
1994
|
2023
|
|
1995-96
|
2037
|
|
1996-97
|
1794
|
|
1997-98
|
1635
|
|
1998-99
|
1349
|
|
1999-2000
|
1171
|
Administrative Expenses
|
Year
|
Rs. in million
|
|
1988
|
44
|
|
1989
|
57
|
|
1990
|
108
|
|
1991
|
114
|
|
1992
|
137
|
|
1993
|
178
|
|
1994
|
201
|
|
1995-96
|
232
|
|
1996-97
|
178
|
|
1997-98
|
166
|
|
1998-99
|
240
|
|
1999-2000
|
197
|
Operating Profit
P r o f i t (Rs. in million)
|
Year
|
From Operations
|
From Equity Trading
|
Total
|
|
1988
|
107
|
103
|
210
|
|
1989
|
166
|
119
|
285
|
|
1990
|
198
|
121
|
319
|
|
1991
|
50
|
307
|
357
|
|
1992
|
126
|
282
|
508
|
|
1993
|
40
|
383
|
423
|
|
1994
|
(7)
|
361
|
354
|
|
1995-96
|
(100)
|
(199)
|
(299)
|
|
1996-97
|
84
|
67
|
151
|
|
1997-98
|
347
|
96
|
443
|
|
1998-99
|
1,066
|
110
|
1176
|
|
1999-2000
|
162
|
149
|
311
|
Total Assets
|
Year
|
Rs. in million
|
|
1988
|
8,307
|
|
1989
|
9,803
|
|
1990
|
11,637
|
|
1991
|
13,473
|
|
1992
|
16,237
|
|
1993
|
20,800
|
|
1994
|
19,840
|
|
1995-96
|
18,416
|
|
1996-97
|
18,299
|
|
1997-98
|
17,986
|
|
1998-99
|
15,903
|
|
1999-2000
|
15,411
|
Investment Schemes
Prompt Profit Certificates (PPC)
A
flexible investment scheme offering an attractive return of 9% per
annum with the option of automatic roll over of principal amount or
principal and profit both. This scheme is of one-month maturity.
Terms
|
Profit Rate* (p.a.)
|
9%
|
|
Maturity
|
One Month
|
|
Payment of Profit
|
On Maturity/Encashment
|
|
Minimum Investment Limit
|
Rs. 10,000
|
|
Eligibility for Investment
|
Can be purchased by individuals (single/joint), corporate bodies, firms, trusts & societies and overseas Pakistanis.
|
Family Income Certificates
An attractive investment scheme especially designed to provide regular income to
households,
retired individuals or those who require a regular monthly income. The
scheme offers an attractive return of 12% per annum with a maturity
period of three years. Revolving finance facility up to the 80% of
deposit amount available. The certificates can be purchased in multiple
denominations and a part of investment can be encashed at the time of
need without hampering your remaining investments. In case of premature
encashment, the premature discounting schedule in force shall apply.
Terms
|
Profit Rate* (p.a.)
|
12%
|
|
Maturity
|
Three Years
|
|
Payment of Profit
|
Monthly
|
|
Credit Facility
|
Revolving finance facility up to the 80% of deposit amount can be obtained instantly
|
|
Minimum Investment Limit
|
Rs. 10,000
|
|
Eligibility for Investment
|
Can be purchased by Individuals (single/joint),
Corporate Bodies, Firms, Trust & Societies.
|
Unique Deposit Certificates
A
unique scheme offering yearly profit payments of as high as 11% per
annum having maturity period of one year. The scheme offers premature
encashment option at a
specified discount rate. Due to its flexibility, the scheme is beneficial to individuals and institutional investors alike.
Terms
|
Profit Rate* (p.a.)
|
11%
|
|
Maturity
|
One Year
|
|
Payment of Profit
|
On Maturity
|
|
Credit Facility
|
Revolving finance facility up to the 80% of deposit amount can be obtained instantly
|
|
Minimum Investment Limit
|
Rs. 10,000
|
|
Eligibility for Investment
|
Can be purchased by Individuals (single/joint),
Corporate Bodies, Firms, Trust & Societies.
|
PICIC Certificates of Deposit (PCD Registered)
This scheme is especially designed to suit the requirements of institutional investors. The
scheme offers maturity options from three months to five years with profit rates ranging from 9.5%
to 13.0% per annum. Profit payment is made half yearly. The amounts
earned can be reinvested to maximize profits. This scheme is suitable
for corporations, societies, trusts, gratuity and provident funds and
individuals.
Terms
|
Maturity
|
Profit (%)*
|
|
Three Months
|
9.5
|
|
Six Months
|
10
|
|
One Year
|
10.5
|
|
Two Years
|
11
|
|
Three Years
|
12
|
|
Five Years
|
13
|
Procedure for application
The first step to make a request for financial assistance is to supply information,
through a prescribed preliminary form which is available free of charge
at picic office. The information includes a detailed description of the
enterprise, its legal status and financial history, resent and proposed
operation, price of equipment and process and other technical forecasts
relating to operations, the cost and availability of raw materials and
other inputs and the arrangements already made or proposed for technical
assistance and know how. The preliminary information so supplied by an
applicant is carefully examined by picnic’s professional staff. Such
further information is also obtained as is considered necessary to
determine the viability of the enterprise except in cases where complex
technology is involved and the appointment of an outside consultant is
considered essential. Liberal assistance is provided to the applicants
in the collection of all relevant data and in synthesizing and
interpreting such data. In the case of large projects where special
investigators are needed, a feasibility study prepared by competent
consultants is required, which is no way connected with the supply of
machinery needed for the proposed enterprise.
Utilization of sanctioned financial assistance:
The funds that are advanced for purchase of
plant and equipment are disbursed against letters of credit established
by picic provided sponsors of the project have complied with the
prescribed terms and conditions of the loan. The local currencies loans
are not paid in a lump sum. These are disbursed in installments keeping
in view the requirements of the project. In the case of underwriting and
direct equity participation, disbursement is made after the requisite
terms and conditions are fulfilled and the relevant documents completed.
The
legal corporate and other formalities, which are to be fulfilled by the
sponsors of the project, are handled by picnic’s professional staff at
its head office, the borrower is properly advised about the procedure
for procurement of machinery at the time of allocation of funds. The
procedure varies according to the type of funds allocated. In the case
of tied funds, the borrower has to send to picic at least three
competitive quotations obtained from different machinery manufactures
suppliers from the same country to which the tied funds relate. This
condition does not apply to allocation from untied funds. However,
machinery and equipment are required to be produced after following the
procedures prescribed for international competitive bidding. Local
competitive bidding procedures are also adopted for the procurement of
locally fabricated machinery.
Other formalities before establishment of letter of credit:
- Loan agreement: a loan agreement between picic and the borrowing company is signed after the raft memorandum and articles of association have incorporated.
- In the case of public limited companies, the consent of the controller of capital issues for paid-up capital/debentures has to be obtained. Further arrangement for underwriting for the public portion of paid-up capital and debentures placement are made. Suitable and satisfactory arrangements re made for the sponsor’s portions of paid-up capital.
- The sponsors of the project have to obtain a plot of land for the location of project and offer to picic, mortgages of land and buildings, hypothecation of plant and equipment and floating charge on all other assets including furnishing to picic, the collateral security. In the case of a bank guarantee, a form has been prescribed by picic.
- undertaking : the company is required to give under taking to picic regarding financing of over-runs, equity options and appointment of picic director on the company’s board, and restriction on charge of ownership/management.
LOAN APPLICATION FORM
(For new industries)
1. The
purpose of this form to obtain preliminary information about the
technical, economic and finical aspects of the application’s proposal
for which loan is desired. The application should take the form of the
memorandum giving information asked for below. Paragraph should be
numbered to correspond with those in this questionnaire.
2. The
applications are advised to study the questionnaire carefully and
provide complete information for each item of the proforma. An
incomplete application will not be registered in PICIC but will be
returned to the applicant for completion.
3. A
completed application in four copies together with supporting
documents, wherever required in the proforma, will be registered and an
acknowledgement issued.
4. After
the preliminary examination of the application, PICIC will inform the
applicants whether or not the project is suitable for PICIC financing.
PRELIMINARY INFORMATION
A. General
1.
· Name and address of the applicant
· Telephone number.
· Income tax G.I.R/T.R. Number.
2. Nature of the present business and location.
3. Nature and location of proposed project and its classification number under the industrial investment Schedule.
4. Amount of loan applied for:
· Foreign currency
· Local currency
5. Name under which the project will be operated and whether it will be:
· a partnership—give names interest with percentage of share and addresses of partners sponsoring the project.
· Private
Limited Company—give names percentage of shares with interest and
addresses of the directors/proposed directors sponsoring the project.
OR
· Public
Limited Companies—give name with percentage of shares and interests
addresses of the directors/proposed directors sponsoring the projects.
6. Have
you interest in other industrial enterprises? If so please, specify the
extent of interest, name of enterprises and enclose the financial
accounts of these enterprises for the last three years on the basis of
which their performance can be adjudged.
7. Name and address of banker (s) of applicant and of banker (s) of individual partner/directors.
8. Did
you apply any other sanctioning institution, say I.D.B.P., for the
financial assistance or the permission to set up this project? if so,
please provide us with copy of the application and your scheme, and
state the reason for approaching PICIC for financial assistance.
B. DESCRIPTION OF THE PROJECT
9. please
describe in detail the project for which financing is requested,
indicating the capacity to be installed for each line of production,
number of the operating days per year and number of shifts per day.
10. Please
give the detail of location of the project describing the facilities
enjoyed by this particular place, in term on communication, supply for
the power, water, fuel, labour and the raw material, marker, tax holiday
etc.
11. Indicate
the estimated area and cost of loan required for the project and its
availability. Estimated area of building (factory, godown, workshop,
office, residential quarter etc) required to be constructed for the
project should be separately started. Please give the detail estimates
of other civil engineering construction required for the project (i.e.
internal road, boundary wall, overhead or underground water tank,
tube-well, jetty, machinery foundation etc). if readily available,
please submit site plans and buildings lay-out, together with
specifications and estimates prepared by a qualified architect.
12. Please
give complete list of machinery and equipment proposed to be imported
for the project, along with a process lay –out wherever applicable.
a. Duly
supported by Performa invoice showing their f.o.b. and freight cost
separately, delivery period and validity date of offer. The amount to be
exclusive of foreign erection cost, which should be indicated
separately, if so required.
b. Items to be produced/fabricated locally
13. Please give brief description of manufacturing process as well as flow chart of the process.
14. Please give the following information in respect of raw material, utilities, labor and staff:-
a. Items and quantities (for the 100% production capacity) of imported and imported raw materials and auxiliary material.
b. Sources of availability of each of imported/ local raw material and auxiliary material.
c. What is the present mod of the import of item mentioned under (a) above.
d. Requirement of the power (KW), water, fuel, steam, for 100% production capacity.
e. Schedule of labor requirements and their wages.
f. Schedule of technical, supervisory and administration staff and their salaries.
15. Please
give an estimate of time required to complete the project indicating
phasing of works (preparatory works, placement of order, construction of
building, delivery period and erection and installation time of
machinery and equipment and trial operations). If the project is to
complete in several stages, please give details. If any progress in this
regard has already been made, this may please to indicate.
16. Who
will be the incharge of the construction of the project and its
operation? Whether technicians for erection and installation of the
machinery and operation of the plant are available locally. If the
technicians are to be brought from abroad indicate number of
technicians, their specific purpose, duration of the stay and foreign
and local currency cost of their services. In the case of their foreign
collaboration/technical know-how royalty agreement, please provide
details.
C. COST OF THE PROJECT
17.
a. Land
b. Development cost of site.
C. Civil engineering construction.
(1) Building
(2) Other civil engineering works (please attach separate enclosures giving break-down of costs as per details giving under Para 11)
d. Imported Machinery and Equipment
e. Customers Duty, Clearance, Insurance Etc.
f. Local Machinery and Equipment
g. Internal Freight
h. Erection and installation of machinery
i. Furniture and fixtures
j. Vehicles
k. Interest during construction
L. Company formation, consulting and engineering fees, and preliminary and start up expenses.
m. Contingencies
C. PROPOSED MEANS OF FINANCING
18.How is the cost of the project under Para 17 above proposed to be financed?
Paid-up capital:
· Your own contribution.
· Others/public.
Loans:
· Loan from picic.
· Other sources (specify)
· Total financing required
D. COST OF PRODUCTION AND PROFITIBILITY
19. Please give the detail information in respect of followings:
a. C & F price of the each of the main imported raw material.
b. C & F price of the each of the auxiliary material.
c. Import duty, sales tax etc., on each of the imported items mention under (a) and (b) above.
d. Prices of the each of the local raw materials and auxiliary material.
e. Establish annual consumption of power, fuel, water etc.
20. Please give the estimated cost of production as per following proforma:
Total annual cost in Rupees
(For 10% Capacity Production)
1. Total Cost of raw materials
Factory landed cost
2. Labour, technical and supervisory staff
3. Manufacturing overheads:
(a) Power
(b) Fuel
(c) Water
(d) Sparer parts
(e) Repair and maintenance
(f) Miscellaneous
4. Depreciation
5. Administrative Salaries
6. Office and Miscellaneous general expenses
7. Selling expenses/ commission etc.
8. Interest an Bank, PICIC and other loans
9. Miscellaneous and unforeseen expenses
Total Cost of Production
Cost of production per unit
21. State
proposed ex-factory-selling price of products and compare with the
prevailing ex-factory prices of similar product of existing factories
and retails prices.
22. Please
give C & F and landed prices of the same or similar imported
products and compare with the unit-selling price of products you propose
to manufacture.
23. Please indicate estimated net profit after tax of your project at 100% capacity operation.
Total sales Rs.
Less total cost of production
& Factory expenses
(Total of item No. 20) Rs.
Profit before tax Rs.
Less: income tax Rs.
Net profit after tax Rs.
F. INFORMATION ON MARKETING:
24. Please
identify the consumer of your products. If you propose to export
products, please indicate the value (F.O.B) and quantity proposed to be
exported. Please also indicate the proposed local net selling prices,
excise duty, sales tax etc, on each time.
25. Please supply the
 | |
   Year Total Local Demand Total Current Position Exported Potential
Quantity Value Quantity Value Quantity value
|
Please explain in detail exactly how you arrived at each figure in the above estimate.
26. What
would be estimated yearly net foreign exchange savings/earnings
consequent to the local manufacturer of product (s)? Please give the
details and basis of your calculations.
G. MISCELLANEOUS:
27. Are there any special considerations, which you think PICIC should take into account while considering your application?
H. DECLARATION:
We hereby certify that the above particulars are correct to the best of our information and beliefs.
Role in economy:
Picic has done a marvelous job for Pakistan industry. It affects the GDP positively. Due increase in the industries, the employment rate increase. It helps the exports of Pakistan.
It
does not give loans only to industries, but also helps a common person
who wants to do any type of legal business. Picic encourages all those
people who want to run their own business. It helps the stock industry
of Pakistan.
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