annual report june 2018 - sindh leasing company ltd.notice is hereby given that the fifth annual...
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Annual Report June 2018 SINDH EL ASING
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VisionTo catalyze the untapped potential of theeconomy through ease of access to financesacross sectors – ranging from the agro-basedto industrial – leading the country towards
prosperity.
MissionPrefrably to provide lease finance and other productsa n d s e r v i c e s , t a i l o r m a d e t o s u i t t h erequirements of the customer, be it a smallf a r m e r , s m a l l a n d m e d i u m s i z eentrepreneur(s) or enterprise(s) or womanowned business, for sustainable and long term
financial solutions.
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Annual Report June 2018 SINDH EL ASING
Corporate Information
Board of Directors
- Non-Executive Director- Non-Executive Director
- Executive Director
- Independent Non-Executive Director- Independent Non-Executive Director
CFO & Company Secretary
Mr. Rehan Anjum
Audit Committee
Registered Office
Mrs.Masooma HussainMr. Muhammad Raja AbbasMr. Muhammad Aftab Alam - Chairman
- Member - Member
Third Floor, Imperial Court BuildingDr. Ziauddin Ahmed Road, Karachi
Banker
Sindh Bank Limited
Syed Ali Murtaza KazmiMr. Muhammad Bilal SheikhMr. Naim FarooquiDr. Noor Alam
Chairman -
Chief Executive-
Auditors
BDO Ebrahim & Co.Chartered Accountants
nd2 Floor, Block C Lakson Square Building-1Sarwar Shaheed Road Karachi.
Web: www.sindhleasingltd.com
Bank Islami Pakistan Limited
Mr. Muhammad Bilal Sheikh
Dr. Noor AlamMrs.Masooma Hussain
Mr. Muhammad Aftab Alam
Syed Ali Murtaza Kazmi
Mr. Muhammad Raja Abbas
Mr. Naim Farooqui
Human Resource Committee
- Chairman - Member
-- MemberMember
Member
United Bank Limited
- Non-Executive Director
Branch Offices
Larkana / Naudero BranchRaza Shah Mohalla, VIP Road,Larkana
Hyderabad Branch
Legal Advisor
Muhammad Nadeem Khan ndSuite # 28-A, 2 Floor
Fareed Chamber Abdullah Haroon Road Karachi
Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad
Islamabad Branch
Select One Plaza, F-11 Markaz, Sindh Bank Ltd, Islamabad
Lahore Branch
2nd Floor, Plot No. S-19, R-30Shahrah-e-Quaid-e-AzamLahore
- Independent Non-Executive Director
NRSP Microfinance Bank
Annual Report June 2018 SINDH EL ASING
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Table of Contents
Directors’ Report 05
Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 14
19
Notice of Annual General Meeting 04
Auditors’ Report to the Members
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
53Form of Proxy
Statement of Comprehensive Income
Review Report to the members on Statement of Compliance with Public Sector Companies (Corporate Governance) Rules, 2013
21
23
25
26
27
24
28
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Annual Report June 2018 SINDH EL ASING
Notice of Annual General Meeting
Notice is hereby given that the fifth Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on October 18, 2018
at 4.00 p.m. at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to transact the
following business:
Normal Business:
1. To confirm the minutes of the Fourth Annual General Meeting held on October 24, 2017.
2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2018, along with the
Directors’ and Auditor's Reports thereon.
3. To approve the re-appointment of external auditors of the Company for the year ending June 30, 2019 and fix their
remuneration.
Special Business:
1. To approve amendment in Clause 3 of Articles of Association and Memorandum of Association Clause 5 during the year.
2. To approve payment of remuneration and provision of certain facilities to the CEO of the Company.
3. Any other business with the permission of the Chair.
By Order of the Board
Rehan Anjum
Company Secretary
Karachi: August 15, 2018
Annual Report June 2018 SINDH EL ASING
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Director’s Report
On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the fifth Annual Audited Financial Statements for the year ended June 30, 2018.
Review of Business and Operation
The Company earned a gross revenue of Rs. 280.193 million during the year under review against a gross revenue of Rs. 224.163 million in the corresponding year. Total administrative expenses for the year amounted to Rs 177.874 million against Rs 130.528 million last year. Profit before tax and provision for the current year is Rs 88.198 million as compared to Rs 63.064 million of the corresponding year.
Disbursement in the current year of both leases and loans amounting to Rs 2,448.483 million as compared to Rs 1,338.94 million last year and Rs. 1,800 million as per the budget for the year is an impressive growth. Our lease and loan portfolio grew by 80% despite declining 31 proposals amounting to Rs 938.610 million.
Steady growth in our lease and loan portfolio exhibits sound business acumen. Our customer screening process being tough and accurate will be maintained so as to ensure further growth of unblemished clean business portfolio. A further injection of Rs 1.5 billion equity shows the confidence that our sponsor Government of Sindh has in our company, which we are determined to maintain and enhance as we progress into the ensuing year.
During the year the company has obtained permission to issue certificates of deposit from Securities and Exchange Commission of Pakistan (SECP). Up till June 30, 2018, the Company has raised Rs. 23.9 million through issue of certificate of deposits.
Operating Results
The Company has transferred an amount of Rs. 31.667 million to revenue reserve during the year.
As at June 30, 2018, the value of investments of provident fund and gratuity fund of the Company are Rs. 19.1778 million and Rs. 9.396 million respectively.
Risk management
Principal risks in the current economic and business scenario and regulatory compliance facing the Company are as follows:
Credit Risk
The risk exposure to actual loss (opportunity cost) as a result of the default/failure to perform by a client with which SLCL does business.
Market Risk
The risk exposure due to external forces that could significantly change the fundamentals that affect any borrower’s overall objectives and strategies and may even put the borrower out of business.
Liquidity Risk
Liquidity risk is the exposure to incur loss as a result of the inability to meet cash flow obligations in a timely and cost-effective manner.
Balance SheetAs at June
30, 2018As at June
30, 2017
----------(PKR Million) ---------Paid-up capital 3,500.00 2,000.00Total equity 3,712.091 2,148.760Fixed Assets 23.274 31.530Net investment in nance leases 2,700.274 1,384.840Auto and Working capital loans 689.555 468.560
Prot & Loss
For the year Ended June
30, 2018
For the year Ended June
30, 2017
Revenue –
Net
266.073 193.594Administrative expenses 177.874 130.528Prot before provision & tax 88.198 63.065Prot after tax
63.334 44.755
EPS
0.28 0.26
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Annual Report June 2018 SINDH EL ASING
Operational Risk
This risk arises due to operations that are inefficient and ineffective in satisfying customers and achieving the quality, cost and time objectives.
Risk management is a continuous on-going process to detect and manage risks. The above risks are managed mainly through risk-adjusted pricing of individual lease / loan transactions, setting of risk limits for individual positions or portfolios, use of guarantees, securitization of risks, buying and selling of assets, diversification, negotiation of price contracts, regular monitoring of the Company’s consolidated credit exposure and exposure limits defined by the regulator and regular risk assessment of each customer for updating its risk rating.
Board of Directors
During the year under review Mr. Anis Khan and Syed Hassan Naqvi submitted their resignations from the Board as Directors of the Company. The Board wishes to place on record its appreciation for their valuable contribution in the Company. The Board has appointed Mr. Muhammad Raja Abbas and Dr. Noor Alam as a representative of Government of Sindh as Directors of Sindh Leasing Company Limited.
Directors' Meeting
Director’s Report
S.No Name of Director
No. ofmeeting(s)
held during theTenor in the
year
Total no. of
meeting(s) attended
1 Mr. Ali Murtaza Kazmi 4 3*2 Syed Hassan Naqvi 4 2 *3 Mr. Anis Khan 4 44 Muhammad Bilal Sheikh 4 45 Mr. Muhammad Aftab Alam 4 46 Mr. M. Naimuddin Farooqui 4 47
Mrs. Masooma Hussain 4 1**
During the year under review, four meetings of the Board of Directors of SLCL were held. Attendance by each director was as follows:
* Leave of absence was granted to Directors who could not attend the Board meeting.
** Directors who has appointed during the year.
Audit Committee’s Meetings
S.No Name of DirectorNo. of meeting(s) held during the
year
Total no. of meeting(s)
attended1 Mr. Muhammad Aftab Alam 4 42 Mr. Anis Khan 4 43
Mrs. Masooma Hussain 4 1*
During the year under review, four meetings of the Audit committee of SLCL were held. Attendance by each director was as follows:
* Member who has appointed during the year.
Pattern of Shareholding
No. of shareholders
Shares held by
Shareholding No. of shares held
Percentage
From To
1 Government of Sindh
1 349,999,993 349,999,993 99.999998
7 Directors 349,999,994 350,000,000 7 0.000002
8 Total 350,000,000 100
Annual Report June 2018 SINDH EL ASING
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The pattern of shareholding as at June 30, 2018 is as follows:
Corporate and Financial Reporting Framework
This part of the Directors’ report to shareholders is given as required under section 226 & 227 of the Companies Act 2017:
1. The financial statements prepared by the management of Sindh Leasing Company Limited present fairly its state of affairs, the result of its operations, cash flows and changes in equity.
2. Proper books of account of Sindh Leasing Company Limited have been maintained.
3. Appropriate accounting policies have been consistently applied in preparation of financial statements. Accounting estimates are based on reasonable and prudent judgment.
4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.
5. The system of internal control is sound in design and has been effectively implemented and monitored.
6. There are no significant doubts upon the ability of Sindh Leasing Company Limited to continue as a going concern.
7. The appointment of Chairman and other members of Board and the terms of their appointment along with the Remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices.
External Auditors
The Audit Committee has recommended the name of M/S BDO Ebrahim & Co., Chartered Accountants as external Auditors of the Company for the year ending June 30, 2019. The Board of Directors, on the recommendation of the Audit Committee has proposed the name of retiring auditors BDO Ebrahim & Co., Chartered Accountants as external Auditors for the next term. The retiring auditors M/s. BDO Ebrahim & Co., Chartered Accountants, being eligible, offer themselves for re-appointment in the forthcoming Annual General Meeting.
Key Operating and Financial Data
Key operating and financial data of last five years is annexed to the Annual Report.
Internal Control and Compliance
The management has devised internal controls to enhance accuracy and reliability of financial reporting. Cyclical reviews and monitoring of internal controls is given paramount importance to assert nonstop functioning of all processes which lead to accurate results. Moreover our decision to outsource the internal audit function to Grant Thornton Anjum Rahman, Chartered Accountants who report directly to the Audit Committee further supplements our confidence on our systems as they provide unbiased opinions on each testing review.
Credit Rating
JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Sindh Leasing Company Limited (SLCL) to ‘A+’ (Single A Plus) long term and ‘A-1’ (A- One) short term. Outlook on the assigned ratings is ‘Stable’.
Dividend
The Company has not declared any dividend for the year ended June 30, 2018.
Challenges
Favorable economic environment has stimulated activity in various sectors, namely the SME and Consumer sector(s). This has resulted in an increase in demand of various products that compliment ones’ lifestyle and status such as the increase in demand of Saloon cars and SUV vehicles. Commercial Banks backed by their excessive liquidity and huge margin for negotiation are always ahead in the race of taking full advantage of such financing opportunities. This challenge of Sindh Leasing Co. Ltd (SLCL) has remained unchanged to date, but our permission to raise deposits through issuance of Certificate of Deposit (COD) would put SLCL in a good enough position to face these challenges with its sound business strategy and approach.
Future Outlook
As per Monetary Policy Statement of July 2018, SBP projects FY 2019 GDP growth to be around 5.5 percent against the annual target of 6.2 percent. Further due to the risking trend of core inflation (ie 5.2 percent in June 2018) SBP’s model-based range for average CPI inflation will range from 6.00 to 7.00 percent. In order to control inflationary pressures, SBP announced a 25 bps increase in the Policy rate in January 2018, 50 bps in May 2018 and 100 bps in July 2018, increasing the Policy rate from 5.75 percent to 7.5 percent. Under
Director’s Report
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Annual Report June 2018 SINDH EL ASING
current circumstances of deteriorating economic numbers, further rise(s) in the Policy rate cannot be ruled out.
Corporate Social Responsibility
Our company’s efforts are not only channeled towards the growth of business but also the wellbeing of society. In view of this SLCL is proud to inform that it has contributed an equivalent of one days’ salary of its employees and employer contribution into the construction of the “Daimer Basha & Mohmand Dams.”
Acknowledgements
The Board appreciates the support that our sponsors, i,e the Government of Sindh (GoS) and the confidence that its valued customers have exhibited in the Company. The company is positive this confidence would continue. The guidance and support provided by our regulators the Securities and Exchange Commission of Pakistan cannot go unrecognized. Our staff has showcased dedication and support that is expected of them and this Company could not have achieved the growth as highlighted above without this.
Muhammad Bilal Sheikh
Chief Executive
August 15, 2018
Director’s Report
Annual Report June 2018 SINDH EL ASING
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ڈا��ز ر�رٹ
�، �رڈ آف ڈا��ز � �� � �ھ �� � � (�) � �٣٠ن �٢٠١٨ ا�م �� �� وا� �ل � ��� ��� � �ہ (audited) ا�ؤ� � ��
�� �ت �س � ر� �ں۔
ور آ�� � ��ہ �رو�را
� � ز� �ر �ل � �� آ�� (revenue) 280.193 � رو� �� � �� �ل ا� �ت � � �� آ�� (revenue) �224.163 �۔ �ل �
ز� �� � �� � ا�� ا�ا�ت �� �ل � 130.528 � رو� � �� � �177.874 رو� ر��۔ �� �ل � 63.064 � رو� � � ا
اس �ل اس � �� 88.198 � رو� ر�۔
��دہ �ل � � (lease) اور �� �ت دو�ں � � � ادا�ں � �� 2,448.483 � رو�ر� � � �� �ل اس � �� �1,338.94 رو� � اور �ل �
�� � � � و� � اس � � � � �1,800 رو� �۔�رى � (lease) اور �� �ت � �رٹ �� � ٨٠ � ا�� �ا �و�� ٢١ �� �و� � � �� 938.610
� � �د � دى �۔
رر� �ے � �� �رى �(lease) اور �� �ت � �ازن � �رى �ا� �� �� �۔�را �ز � �� ��ل � �� � (process) � اور در� � � ��ا
غاور �ف �رو�رى �رٹ �� � �� �� � � �� ��۔ �� 1.5 ارب رو� � � ��� (equity) � �رے �(sponsor) �� �ھ � �رى � � ا�د � دا
ور ��� � آ� وا� � � ��ں � � � � �� �� � ۔ ر� � ا �، � � � � ��م � � ا� ��ا�� ��������� �� ء� �رى �� � � �۔ ٣٠ �ن ٢٠١٨ �، � ڈ�زٹ � ����� � � ا�ا ��ر� ا� ا� � آف ��ن (SECP) � ڈ�زٹ � � ن� � ���ل � دورا ء� 23.9 � رو� � ا�� � � �۔���������� � � ا�ا �
� �
ادا �ہ ���
equity ��� � �
� �� ا�� �ت
� �� � �� ��� �رى
�د�ر اور ور� � �� �ت
ن � اور �ن �ل � دورا
آ�� – ��
ا�� ا�ا�ت
(provision)ز� اور �و و�ن �� � ا
ز� �� � ا
(EPS)� � آ��
ن� ٣١٫٦٦٧ � رو� � ر� آ�� (revenue) � ذ�� � � � � �۔ �ل � دورا
٣٠ �ن ٢٠١٨ � � � �او�� � اور ��� � � ��� �رى � �ر ��� �١٩٫١٧٧٨ رو� اور٩٫٣٩٦ � رو� �۔
3,500.00 2,000.00
3,712.091 2,148.760
23.274 31.530
٣٠ �ن ٣٠٢٠١٨ �ن٢٠١٧رو�
2,700.274 1,384.840
689.555 468.560
٣٠ �ن ٣٠٢٠١٨ �ن٢٠١٧رو�
266.073 193.594
177.874 130.528
88.198 63.065
63.334 44.755
0.28 0.26
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Annual Report June 2018 SINDH EL ASING
(Risk management) رو�رى �ے � � ا�� ڈ���
� � در � �دى �رو�رى �ات ��دہ � ، �رو�رى � �� اور ا�� (regulatory)� �درج ذ� �:
�� � �ن � �ہ
ن� � � � � �د�ہ ��/ � �ر�د� د�� � در� �ہ درا� �رو�رى �ن (�رو�رى �� � ��) � � � �SLCL � �� �رو�ر �� � ا
�� م � � � � � �۔
�ر� � �ہ
ہ�ض �اہ � �رو�ر �و� ��ں � �� � در� �ہ �� � � ا��ں � �� �� � � �ض �اہ � �� �� اور � �ں � �� �� � اور � � � � و
� � �ل دے۔
� � (liquidity) � �ہ
�� � �� � و� � � ��وا� �ن �۔ ر�ں ��را اور ��� �� � �� � � � ذ� دا � � � �ہ �ض �اہ � �و� �را
آ�� (operational) � �ہ
�� ��� � �� اور �د، �� اور و� � �� �� �� � �� اور � ��� آ�� � �ا �� �۔��� � �ہ �� �
غ�� اور اس � ا�م �ے۔ ��رہ � �ات � ا�م ا� � ا�ادى �/(lease)�ض �ے � � ا� � �رى �� � (process)� �� �وں � �ا
� � د�، � �ے- �� �ہ � � ذر� � �� �، ا�ادى �ز� � �رٹ �� � ��ے � �ود � � � �� �، �� � ا� ل � �� �، �ے � �ظ
� �� �، ا�� �ت � �� و �و� � ��، �ع، �ں � �ا�ات، ��ات، �ا� � � ا�م �ہ �� � ا�زر اورر�� � �� � ا�زر � � �ود اور �
�� � � �ے � �ا� � � اور اس �ے � در� �ى � ��۔
�رڈز آف ڈا��ز
ن� � � � � �� وا� ��ت � �ا� �� اس �ت � ےد� �۔۔ �رڈ ا ز�ِ �ر �ل � �ب ا� �ن اور � � �ى � � �رڈ آف ڈا��ز � ا� د
ر�رڈ � �� �� �۔۔ �رڈ � �ر �ھ �� � � ڈا��ز � �ب � را� �س اور ڈا� �ر �� �ر ��ہ �ھ �ر� � ا�ب �� �۔
ڈا��ز � ا�س
ن �SLCL �رڈ آف ڈا��ز � �ر ا�س ��۔ � ڈا�� � ��ى � � درج ذ� � ز� �ر �ل � دورا
Annual Report June 2018 SINDH EL ASING
11
�س � �اد
� �ل � � �� � �� � � ڈا��ز � �م � �ر
4 3* �ب � �� �� 1
4 2 * � � �ى 2
4 4 �ب ا� �ن 3
4 4 �ب � �ل � 4
4 4 �ب � آ�ب �� 5
4 4 �ب � � ا�� �رو� 6
4 1** � �� �� 7
�س � �اد
� �ل � � �� � �� � � ڈا��ز � �م � �ر
4 4 �ب � آ�ب �� 1
4 4 �ب ا� �ن 2
4 1 �ز �� � 3
ےدى �۔ ن� اس ا�س � ر� د *� ڈا�� ا�س � �� � �� ا
نا�ب �ا۔ ہڈا��ز � � �ل � دورا ** و
آڈٹ � � ا�س
ز� �ر �ل � � � آڈٹ � � �ر ا�س ��۔ � ڈا�� � ��ى � � درج ذ� �؛
نا�ب �ا۔ ہڈا��ز � � �ل � دورا *و
12
Annual Report June 2018 SINDH EL ASING
� ر� � ر�ن
٣٠ �ن ٢٠١٨ � � ر� � ر�ن درج ذ� �:
� اور ��� ر�ر� ڈ�� را ادا
� ��رز � � ڈا�� � ر�رٹ � � � ٢٠١٧ � � ا� � � � ٢٢٦ اور ٢٢٧ � � �ورى �
١. �ھ �� � � � � � �ر �دہ ��� �� ت (statements) آ�� � ��، � � اور ا�� � رد و�ل � ��ت � � �� � �� � ۔
٢. �ھ �� � � ���ں � ��ں (books) � �� �ر � ر� �۔
٣. ��� د�و�ات � �رى � �� ا�ؤ� ��ں � ا�ل � � �۔ ا�ؤ� �ں � �د �� اور �ظ ا�ازے �۔
� � �۔ ن � �رآ ٤. ��� د�و�ات � �رى � � ا��ا� ا�و� �ر ، � ��ن � �� �� �، ا��
٥. ا�رو� �ا� � �م � ڈ�ا� �ط � اور اس � ��� �ر � �ذ � � � � اور �ا� � �� �
رے � �� � �� � �رے � �� �ص �ت � �۔ ٦. �ھ �� � � � ا� �رى ر� وا� ادا
ن� ��وں � �� � �� �� � � � � �� �د � اور �� ��ں � ا�ل نا�ب � �ت اور ا ن � ا�ب ، ا ٧. �� اور �رڈ � د� �ا
� �۔
ا�� آڈ�ز���� ���� � � � �۔ �رڈ آف ڈا��ز ،آڈٹ � � �رش � � �م ٣٠ �ن ٢٠١٩ � ا�م �� �ل � � � �رش وا�ا� ا� �، �ر�ڈ ا�و ����آڈٹ � �ز � ڈى ا � �ر �و� آڈ�ز � ا� �ت � � ا�ب � � �م �� � � �۔ �وش �� وا� آڈ�ز �ز � ���� وا�ا� ا� �، �ر�ڈ ا�و �����وش �� آڈ�ز �ز � ڈى ا ہا� آپ � ��� �م ا�س � دو�رہ ا�ب � � � � ر� �۔ ���� ہدو�رہ � � � اور و � اس �ت � ا� � � و وا�ا� ا� �، �ر�ڈ ا�و ڈى ا
ا� آ�� اور ��� ا�اد و�ر
�� �� ��ں � ا� آ�� اور ��� ا�اد و�ر اس ��� ر�رٹ � �� � �۔
ا�رو� �ا� اور �
ہ ���� � ��� ر�ر� � در� اور � �� � � ا�رو� �ا� � �� اور اس � �ذ � �۔�ر �ر ا�رو� �ا� � ��ہ اور �ا� � ا�� ا� دى � � �� و�ق � و �� ���� � آڈٹ � � �اہ را� ِ���� �م �� � (processes) � �م �� ر� � در� �� �ا �� �۔ ا�رو� آڈٹ � �م �ا� �� ا� ر�ن، �ر�ڈ ا�و
ہ� �� � ��ے � � ��ارى � را� د� �۔ ر�رٹ �� �، � �د �� � � �ا� �م � �رے ا�د � ا�� � � �� و
11349,999,993349,999,99399.999998
7349,999,994350,000,00070.000002
8350,000,000100
Annual Report June 2018 SINDH EL ASING
13
��ٹ ر���� �
رر� � ر� ��JCR-VISٹ ر� � � (JCR-VIS) � �ھ �� � � � �� ا�ت ا�(entity) ر�+Aاور � ا�ت ر� ��A-1ا
� آؤٹ � � �
�� �
� � �٣٠ن ٢٠١٨ � � �� وا� �ل � � � � �� � ا�ن � � �۔
در� ��
�ا� �� ��ل �د �ز، � SMEاور �ر�، � ���ں � �وغ د�۔ اس � � �د ��ت � � � ا�� � � ��ں � ر� � اور � �
ور �SUVڑ�ں � � � ا�� � �� �۔�ر� � ا� � � � (liquidity) اور �ت � �� � ��ى ��وا د� � � � �ن (saloon car)�را
���ٹ (margin) � و� � ا� �رو�رى �ا�ں � ��ہ ا�� � � � اس �� � ر� � � � ر� � ۔�ھ �� � � (SLCL)� در� � ور � �SLCL اس � � � � �ز� � �������� ء� ذر� ڈ�ز� � ا�� � � ا ن� ا�ا ء� ا�زت � ا �� � ا�ا � و� � ��د �، � � ڈ�زٹ � �
ن�� � � �ر �� � � �۔ � اور ا�وچ � �د � ا
�� � � �
�SBP ��� ٢٠١٨ � ��� �� � �ن � �� �ل ٢٠١٩ � � �� �� �اوار (GDP) � � �ا�ازہ �� ٥٫٥ � � � ���GDP �٦٫٢ �ف
�۔ �� � � �دى ا�اط زر (�ن ٢٠١٨ � �٥٫٢) ��� ر�ن ، � � �SBP �ڈل � �د � �رف � � ٦ � ٧ � � ر� � ر� �۔ ا�اط زر � � د�ؤ
� �� �� � �، �SBP �� �خ � ٢٥ � �ا� � ا�� �رى ٢٠١٨ � �، ٥٠ � �ا� � ٢٠١٨ اور ١٠٠ � �ا� ��� ٢٠١٨ � ا�� � اور �� �خ
� ٥٫٧٥ � ��٧٫٥ ا�� �د�۔��دہ ا� �� ���� ا�ادو�ر � �ر�ل �، �� ا��(ا��) � ا�ن � �د � � � �۔
رى را� �� ذ� دا ادا
�رى �� � �ف �رو�ر � �� � � � ��ے � �ى � � � �۔ SLCLاس � � اس �ت � ا�ع د� �� � �س �� � � اس � �ز� �
ا� دن � �اہ � �وى ر� ڈ�� اور � ڈ� � � �وا� � اور اس � آ� � �� �۔
ا�ر �
��ر� ا� ا� � آف ������ � ا� ا��ز ، �ر� آف �ھ، اور �ز � ��رز � �� � �ا� � � ا�ں � � � ا�د �۔ � ا� � � � ا�د �رى ر� �۔
��ن � �� � � �� وا� ر�� اور � � �� �ا� � � ر� � �۔ �رے ً � � �� � اور �� � �� �� � � � � � �د � � � ��رہ �� ��
�� � � � � � اس � �� � �۔
� �ل �
� ا���
١٥ ا� ٢٠١٨
14
Annual Report June 2018 SINDH EL ASING
Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013
Name of Company: Sindh leasing Company Limited Name of line ministry: Finance Ministry
I. This statement presents the overview of the compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 (hereinafter called “the Rules”) issued for the purpose of establishing a framework of good governance, whereby a public sector company is managed in compliance with the best practices of public sector governance.
II. The company has complied with the provisions of the Rules in the following manner:
S. No.
Provision of the RulesRule No.
Y N
Tick the relevant box
1.The independent directors meet the criteria of independence, as dened under the Rules.
2(d) √
2.
The Board has at least one-third of its total members as independent directors. At present the Board includes:
Category NamesDate of
appointmentIndependent Directors
1. Mr. Muhammad Aftab Alam
2. Mr. Raja Muhammed Abbas
3. Mr. Ali Murtaza Kazmi
October 24, 2017
April 27, 2018
October 24, 2017
Executive Directors
Mr. Mohammad Bilal Sheikh October 24, 2017
Non-Executive Directors
1. Mr. Asif Jahangir
2. Naim Farooqui
3. Mrs. Masooma Hussain
April 27, 2018
October 24, 2017October 24, 2017
3(2)
√
3.
The directors have conrmed that none of them is serving as a director on more than ve public sector companies and listed companies simultaneously, except their subsidiaries.
3(5) √*
4.The appointing authorities have applied the t and proper criteria given in the Annexure in making nominations of the persons for election as board members under the provisions of the Act.
3(7) √
5.The chairman of the board is working separately from the chief executive of the Company.
4(1) √
6.The chairman has been elected by the Board of directors except where Chairman of the Board has been appointed by the Government.
4(4) √
7.The Board has evaluated the candidates for the position of the chief executive on the basis of the t and proper criteria as well as the guidelines specied by the commission.
5(2) √
8.
(a) The company has prepared a “Code of Conduct” to ensure that professional standards and corporate values are in place.
(b) The Board has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures, including posting the same on the company’s website.
5(4) √
(www.sindhleasingltd.com)
(c) The Board has set in place adequate systems and controls for the identication and redressal of grievances arising from unethical practices.
Annual Report June 2018 SINDH EL ASING
15
9.The Board has established a system of sound internal control, to ensure compliance with the fundamental principles of probity and propriety; objectivity, integrity and honesty; and relationship with the stakeholders, in the manner prescribed in the Rules.
5(5) √
10.The Board has developed and enforced an appropriate conict of interest policy to lay down circumstances or considerations when a person may be deemed to have actual or potential conict of interests, and the procedure for disclosing such interest.
5(5)(b) (ii)
√
11.The Board has developed and implemented a policy on anticorruption to minimize actual or perceived corruption in the company.
5(5)(b) (vi)
√
12.The Board has ensured equality of opportunity by establishing open and fair procedures for making appointments and for determining terms and conditions of service.
5(5)(c)(ii)
√
13.
The Board has ensured compliance with the law as well as the company’s internal rules and procedures relating to public procurement, tender regulations, and purchasing and technical standards, when dealing with suppliers of goods and services.
5(5)(c) (iii)
√
14.The Board has developed a vision or mission statement and corporate strategy of the company.
5(6)√
15.The Board has developed signicant policies of the company. A complete record of particulars of signicant policies along with the dates on which they were approved or amended, has been maintained.
5(7) √
16.
The Board has quantied the outlay of any action in respect of any service delivered or goods sold by the Company as a public service obligation, and have submitted its request for appropriate compensation to the Government for consideration.
5(8) N/A
17.The Board has ensured compliance with policy directions requirements received from the Government.
5(11)
18.
(a) The Board has met at least four times during the year.
(b) Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings.
(c) The minutes of the meetings were appropriately recorded and circulated.
6(1)
6(2)
6(3)
√
19.
The Board has monitored and assessed the performance of senior management on annual/half-yearly/quarterly basis* and held them accountable for accomplishing objectives, goals and key performance indicators set for this purpose.
8(2) √
20.The Board has reviewed and approved the related party transactions placed before it after recommendations of the audit committee. A party wise record of transactions entered into with the related parties during the year has been maintained.
9 √
21.The Board has approved the prot and loss account for, and balance sheet as at the end of the rst second and third quarter of the year as well as the nancial year end, and has placed the annual nancial statements on the company’s website.
10 √
22.
All the Board members underwent an orientation course arranged by the company annually to apprise them of the material developments and information as specied in the Rules.
11 √
23.
(a) The Board has formed the requisite committee, as specied in the Rules.(b) The Committees were provided with written term of reference dening their
duties, authority and composition.
12 √
16
Annual Report June 2018 SINDH EL ASING
(c) The minutes of the meetings of the committee were circulated to all the Board members.
(d) The committees were chaired by the following non-executive directors:
Committee Number of Members
Name of Chair
Audit Committee Three Mohd. Aftab AlamRisk Management Committee
Three Ali Murtaza Kazmi
Human Resources Committee
Four Asif Jahangir
Procurement Committee Three Raja Mohd. AbbasNomination Committee Four Ali Murtaza Kazmi
24.The Board has approved appointment of Chief Financial Ofcer, Company Secretary and Chief Internal Auditor, by whatever name called, with their remuneration and terms and conditions of employment, and as per their prescribed qualications.
13 √
25.The Chief Financial Ofcer and the Company Secretary have requisite qualication prescribed in the Rules.
14
26. The company has adopted International Financial Reporting Standards notied by the Commission under clause sub-section (1) of section 225 of the Act.
16 √
27.The directors’ report for this year has been prepared in compliance with the requirements of the Act and the Rules and fully described the salient matters required to be disclosed.
17 √
28.The directors, CEO and executives, or their relatives, are not, directly or indirectly, concerned or interested in any contract or arrangement entered into by or on behalf of the company except those disclosed to the company.
18 √
29.
(a) A formal and transparent procedure for xing the remuneration packages of individual directors has been set in place and no director is involved in deciding his own remuneration.
(b) The annual report of the company contains criteria and details of remuneration of each director.
19 √
30. The nancial statements of the company were duly endorsed by the chief executive and chief nancial ofcer, before approval of the board.
20 √
31.
The Board has formed an audit committee, with dened and written terms of reference, and having the following members:
Name of member CategoryProfessional background
Mr. Mohammed Aftab Alam
Independent Chartered Accountant
Mrs. Masooma Hussain Non-Executive BankingMr. Raja Muhammad Abbas
Non-Executive Bureaucrat
The Chief executive and chairman of the Board are not members of the audit committee.
21(1)and
21(2)
√
32.
(a) The chief nancial ofcer, the chief internal auditor, and a representative of the external auditors attended all meetings of the audit committee at which issues relating to accounts and audit were discussed.
(b) The audit committee met the external auditors, at least once a year, without the presence of the chief nancial ofcer, the chief internal auditor and other executives.(c) The audit committee met the chief internal auditor and other members of the internal audit function, at least once a year, without the presence of chief nancial ofcer and the external auditors.
21(3)√
Annual Report June 2018 SINDH EL ASING
17
33.
(a) The Board has set up an effective internal audit function, which has an audit charter, duly approved by the audit committee.(b) The chief internal auditor has requisite qualication and experience
22 √
prescribed in the Rules.(c) The internal audit reports have been provided to the external auditors for their review.
34.The external auditors of the company have conrmed that the rm and all its partners are in compliance with International Federation of Accountants (IFAC) guideline on Code of Ethics as applicable in Pakistan.
23(4) √
35.The auditors have conrmed that they have observed applicable guidelines issued by IFAC with regard to provision of non-audit services.
23(5) √
√ * Not applicable for Government Nominee Director.
MUHAMMAD BILAL SHEIKH AND MASOOMA HUSSAINCEO & Chairman Board of Directors
18
Annual Report June 2018 SINDH EL ASING
Explanation for Non-Compliance with thePublic Sector Companies (Corporate Governance) Rules, 2013
We confirm that all other material requirements envisaged in the Rules have been complied with except for the following, toward which reasonable progress is being made by the Company to seek compliance by the end of June 30, 2018:
S.No Rule/sub-ruleno
Reason for non-compliance Future course of action
1. Rule 6(2) The Chairman was approving the notices of meetings including the agenda verbally.
From now all notices of meetings will be approved by the Chairman in writing before their circulation.
MUHAMMAD BILAL SHEIKH AND MASOOMA HUSSAINCEO & Chairman Board of Directors
Annual Report June 2018 SINDH EL ASING
19
Review Report to the Members on Statement of Compliance with thePublic Sector Companies (Corporate The Government) Rules, 2013
Place: Karachi
Dated: August 15, 2018CHARTERED ACCOUNTANTS
Engagement Partner: Mr. Raheel Shahnawaz
We have reviewed the enclosed Statement of Compliance with the best practices contained in Public SectorCompanies
(Corporate Governance) Rules 2013 (the Rules) for the year ended June 30, 2018 prepared by the Board of Directors of
Sindh Leasing Company Limited to comply with the provisions of the Rules.
The responsibility for compliance with the Rules is that of the Board of Directors of the Company. Our responsibility is to
review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects
the status of the Company's compliance with the provisions of the Rules and report if it does not and to highlight any
non-compliance with the requirements of the Rules. A review is limited primarily to inquiries of the Company's personnel
and review of various documents prepared by the Company to comply with the Rules.
As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to
consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion
on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.
The Rules requires the Company to place before the Audit Committee, and upon recommendation of the Audit
Committee, place before the Board of Directors for their review and approval its related party transactions distinguishing
between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions
which are not executed at arm's length price and recording proper justification for using such alternate pricing
mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the
related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried
out any procedures to determine whether the related party transactions were undertaken at arm's length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance
does not appropriately reflect the Company’s compliance, in all material respects with the best practices contained in the
Rules as applicable to the Company for the year ended June 30, 2018.
Further, we highlight below instance of non-compliance with the requirements of the Rules reflected in the paragraph 17
where these are stated in the Statement of Compliance.
2nd Floor, Block C LaksonSquare Building-1Sarwar Shaheed Road Karachi.
S.No. Reference Clause description
Written notices of meetings, including the agenda, are not approved by the Chairman.Rule 6(2)1
20
Annual Report June 2018 SINDH EL ASING
27.04
32.71
44.25
44.75
63.33
Financial Highlights
(Rs. in million)
2014 2015 2016 2017 2018
Operational Results
Gross Revenues 50.32 100.62 125.63 224.16
Financial Charges 0.00 0.85 11.09 30.57
Gross Margin 50.32 70.25 114.54 193.59
Prot Before Taxation 39.77 46.38 52.03 56.85
Prot After Taxation 27.04 32.71 44.25 44.75
Balance Sheet
Net Investment in Leases 40.00 444.19 852.04 983.85
Shareholders' Equity 1,000.00 1,000.00 1,000.00 2,000.00
Total Liabilities 23.93 182.69 413.34 910.55
Total Assets 1,050.96 1,242.44 1,517.35 3,059.31
Year 2017-18
Equipment
Vehicles
Prot After TaxationProt Before Taxation
Category-wise Lease Disbursements Rs. 1,338.00 Million
Year 2016-17
Equipment
Machinery
Vehicles
0
500
1000
1500
Rs. in
millio
n
Net Investment in Lease Finance
Total Asset Base
0
500
1000
1500
2000
2500
Rs. in
millio
n
Gross Income vs Financial Cost
Rs. in
millio
n
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Rs. in
millio
n
Machinery
Category-wise Lease Disbursements Rs. 2,448.00 Million
Rs. in
mil
lio
n
0
25
50
75
100
39.77
46.38
52.03
56.85
75.04
YEARS
2014 2015 2016 2017 2018
50.32
100.62
125.63
224.16
280.19
0.00 0.85 11.09
30.57 14.12
0
50
100
150
200
250
300
280.19
14.12
266.07
75.04
63.33
2,700.27
3,500.00
567.22
4,279.31
Rs. in
mil
lio
n
0
25
50
75
100
YEARS
2014 2015 2016 2017 2018
YEARS
2014 2015 2016 2017 2018
Shareholders Equity
1,000.00 1,000.00 1,000.00
2,000.00
3,500.00
YEARS
2014 2015 2016 2017 2018
YEARS
2014 2015 2016 2017 2018
YEARS
2014 2015 2016 2017 2018
40.00
444.19
852.04 983.85
4,279.31
2,700.27
3,059.31
1,242.441,517.35
1,050.96
23%
70%
7%8% 24%
68%
Vehicles
Machinery EquipmentMachinery
Vehicles
Equipment
Annual Report June 2018 SINDH EL ASING
21
Auditors’ Report to the MembersOpinion
We have audited the annexed financial statements of Sindh Leasing Company Limited (the Company), which comprise the statement of financial position as at June 30,2018, and profit and loss account, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.
In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, profit and loss account, statement of comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2018 and of the profit and other comprehensive income, its cash flows and the changes in equity and for the year then ended.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in
Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Information Other than the Financial Statements and Auditor’s Report Thereon
Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Board of Directors for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
22
Annual Report June 2018 SINDH EL ASING
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Report on Other Legal and Regulatory Requirements
Based on our audit, we further report that in our opinion:
a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of 2017);
b) the statement of financial position, the profit and loss account and other comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes thereon have been drawn up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account and returns;
c) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the Company’s business; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
The engagement partner on the audit resulting in this independent auditor’s report is Raheel Shahnawaz.
Auditors’ Report to the Members
Date: August 15, 2018
Place:Karachi
CHARTERED ACCOUNTANTS
Annual Report June 2018 SINDH EL ASING
23
BALANCE SHEETAS AT JUNE 30, 2018
___________ ___________________Chairman Chief Executive
Note
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 7 23,273,880 31,527,292
Intangible assets 8 8,318 490,583
Net investment in nance leases 9 2,049,986,587 972,844,219
Long term loans and advances 10 34,511,067 16,162,371
Long term deposits 432,600 488,600
2,108,212,452 1,021,513,065
CURRENT ASSETS
Short term investments 11 453,959,611 900,000,000
Accrued markup 10,689,042 10,480,368
Loans and advances 12 647,649,089 444,669,002
Current maturity of non-current assets 13 641,244,567 408,724,581
Prepayments 14 5,522,933 4,840,086
Other receivables 15 - 1,909,700
Cash and bank balances 16 412,035,562 267,170,786
2,171,100,804 2,037,794,523
TOTAL ASSETS 4,279,313,256 3,059,307,588
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Authorized share capital
3,500,000,000 2,000,000,000
Issued, subscribed and paid-up share capital 17 3,500,000,000 2,000,000,000
Reserves 18 212,091,271 148,757,597
3,712,091,271 2,148,757,597
NON CURRENT LIABILITIES
Long term security deposits against leases 19 424,922,243 278,045,053
Long term loan 20 - 500,000,000
Certicates of deposit 21 11,600,001 -
Deferred taxation 22 - -
436,522,244 778,045,053
CURRENT LIABILITIES
Trade and other payables 23 28,651,130 18,874,523
19 82,829,232 5,221,800
21 12,300,000 -
Short term borrowings 24 - 82,498,269
Markup accrued 25 43,265 21,458,211
Taxation - net 26 6,876,114 4,452,135
130,699,741 132,504,938
CONTINGENCIES AND COMMITMENTS 27
TOTAL EQUITY AND LIABILITIES 4,279,313,256 3,059,307,588
The annexed notes from 1 to 42 form an integral part of these nancial statements.
350,000,000 (2017: 200,000,000) ordinary shares of Rs. 10/- each
Current maturity of security deposits against leases
Current portion of certicates of deposit
2018 2017
---------------------Rupees---------------------
24
Annual Report June 2018 SINDH EL ASING
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2018
___________________Chief Executive
INCOME
Income from nance lease, auto loans and
working capital loans 218,043,583 140,057,430
Return on investments and deposits 28 61,204,260 83,005,628
Other income 945,608 1,100,709
280,193,451 224,163,767
EXPENSES
Finance cost 29 (14,120,926) (30,570,708)
Administrative expenses 30 (177,874,448) (130,528,171)
Prot before provision and taxation 88,198,077 63,064,888
Provision for potential lease losses (10,884,770) (4,004,759)
Provision against working capital loans (2,000,000) (2,285,790)
Provision against auto nance loans (275,948) -
Reversal of provision against auto nance loans - 74,849
Prot before taxation 75,037,359 56,849,188
Taxation 31 (11,703,685) (12,094,236)
Prot for the year 63,333,674 44,754,952
Earnings per share - basic and diluted (Rupee) 32 0.28 0.26
The annexed notes from 1 to 42 form an integral part of these nancial statements.
Note
2018 2017
---------------------Rupees---------------------
___________Chairman
Annual Report June 2018 SINDH EL ASING
25
STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2018
___________________Chairman Chief Executive
Prot for the year 63,333,674 44,754,952
Other comprehensive income - -
Total comprehensive income for the year 63,333,674 44,754,952
The annexed notes from 1 to 42 form an integral part of these nancial statements.
Note
2018 2017
---------------------Rupees---------------------
___________
26
Annual Report June 2018 SINDH EL ASING
___________
CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2018
___________ ___________________Chairman Chief Executive
CASH FLOW FROM OPERATING ACTIVITIES
Prot before taxation 75,037,359 56,849,188
Adjustment for:
Depreciation 6,559,919 6,929,174
Amortization 482,265 483,587
Property, plant and equipment written off 2,866,664 -
Provision for potential lease losses 10,884,770 4,004,759Provision against working capital loans 2,000,000 2,285,790
Provision against auto nance loans 275,948 -
Reversal of provision against auto nance loans - (74,849)
Gain on disposal of property, plant and equipment (435,842) (540,025)
Finance cost 14,120,926 30,570,708
36,754,650 43,659,144
Operating prot before working capital changes 111,792,009 100,508,332
Movement in working capital
Decrease / (increase) in current assets
Long term loans and advances 3,540,805 652,600
Long term deposits 56,000 (114,000)
Prepayments (682,847) (339,755)
Other receivables 1,909,700 (1,909,700)Accrued markup (208,674) (8,633,749)
Increase in current liabilities
Trade and other payables 9,776,607 8,210,424
14,391,591 (2,134,180)
Cash generated from operations 126,183,600 98,374,152
Finance cost paid (35,535,872) (10,481,812)
Taxes paid (9,279,706) (7,999,821)
Increase in net investment in nance lease (1,315,434,188) (532,797,068)
(Increase) / decrease in auto nance loan (27,278,385) 7,543,137
Increase in loans and advances (204,980,087) (225,771,009)
Increase in security deposit against leases 224,484,622 132,315,153
(1,368,023,616) (637,191,420)
Net cash used in operating activities (1,241,840,016) (538,817,268)
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditure incurred - own use and intangible assets (1,747,829) (13,254,117)
Proceeds from sale of property, plant and equipment 1,010,500 2,822,066
Short term investments - net 446,040,389 (560,259,597)
Net cash generated from / (used in) investing activities 445,303,060 (570,691,648)
(570,691,648)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from certicates of deposit 23,900,001 -
Proceeds from issue of shares 1,500,000,000 1,000,000,000
Long term loan (500,000,000) 250,000,000
Short term borrowings (82,498,269) 82,498,269
Net cash generated from nancing activities 941,401,732 1,332,498,269
Net increase in cash and cash equivalents 144,864,776 222,989,353
Cash and cash equivalents at beginning of the year 267,170,786 44,181,433
Cash and cash equivalents at end of the year 412,035,562 267,170,786(0) 0.34
The annexed notes from 1 to 42 form an integral part of these nancial statements.
Note
2018 2017
---------------------Rupees---------------------
Annual Report June 2018 SINDH EL ASING
27
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2018
___________________Chairman Chief Executive
Capital reserve
Revenue
reserve
Note
Balance as at July 1, 2016 1,000,000,000 43,889,335 60,113,310 1,104,002,645
Transaction with owner
Shares issued during the year 1,000,000,000 - - 1,000,000,000
Total comprehensive income for the year
Prot for the year - - 44,754,952 44,754,952
Other comprehensive income - - - -
- - 44,754,952 44,754,952
Transfer to statutory reserve 18.1 - 22,377,476 (22,377,476) -
Balance as at June 30, 2017 2,000,000,000 66,266,811 82,490,786 2,148,757,597
Transaction with owner
Shares issued during the year 1,500,000,000 - - 1,500,000,000
Total comprehensive income for the year
Prot for the year - - 63,333,674 63,333,674
Other comprehensive income - - - -
- - 63,333,674 63,333,674
Transfer to statutory reserve 18.1 - 31,666,837 (31,666,837) -
Balance as at June 30, 2018 3,500,000,000 97,933,648 114,157,623 3,712,091,271
The annexed notes from 1 to 42 form an integral part of these nancial statements.
---------------------------------------- Rupees----------------------------------------
Issued,
subscribed and
paid-up share
capital
TotalUn-
appropriated
prot
Statutory
reserve
___________
28
Annual Report June 2018 SINDH EL ASING
FOR THE YEAR ENDED JUNE 30, 2018
NOTES TO THE FINANCIAL STATEMENTS
1. LEGAL STATUS AND NATURE OF BUSINESS
Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public company under the repealed Companies Ordinance, 1984. The Company was granted license on March 27, 2014 to carry out leasing business as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003.
100% shares of the Company are held by the Government of Sindh.
JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned A+ and A-1 ratings to the Company for medium to long term and short term respectively. The rating has been reaffirmed on May 28, 2018. The license of the Company to carry out the business of leasing has been renewed and valid for a period of three years w.e.f January 24, 2017.
2. GEOGRAPHICAL LOCATION AND ADDRESSES OF BUSINESS UNITS
"The registered office of the Company is situated at 3rd Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi. The Company presently has five branch offices located as follows:
- Plot # 117-118, Shah Abdul Latif Educational Trust, Block -A, Sindhi Muslim Cooperative Housing Society, Karachi,
- Plot No.11, Faraz Villas Housing Scheme, Taluka Qasimabad, Hyderabad,
- Second Floor, Plot No.S-19 R-30, Shahrah-e-Quaid-e-Azam, Lahore,
- F-11 Markaz, Islamabad, and
- Raza Shah Mohalla, VIP Road, Larkana, Naudero.
3. BASIS OF PREPARATION
3.1. Statement of compliance
These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of International Financial Reporting Standards (IFRS Standards) issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017 and provisions of and directives issued under the Companies Act, 2017. Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS Standards, the provisions of and directives issued under the Companies Act, 2017 have been followed.
The third and fifth schedules to the Companies Act, 2017 became applicable to Company for the first time for the preparation of these financial statements. The Companies Act, 2017 (including its third and fifth schedules) forms an integral part of the statutory financial reporting framework applicable to the Company. Specific additional disclosures and changes to the existing disclosures have been included in these financial statements.
3.2. Basis of measurement
These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost.
These financial statements have been prepared following accrual basis of accounting except for cash flow information.
3.3. Functional and presentation currency
These financial statements are presented in Pak Rupees which is the Company's functional currency and presentation currency.
4. NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS
4.1. Amendments that are effective in current year and are relevant to the Company
The Company has adopted the amendments to the following approved accounting standards as applicable in Pakistan which became effective during the year from the dates mentioned below against the respective standard:
Annual Report June 2018 SINDH EL ASING
29
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
IAS 7
January 01,
2017
IAS 12
January 01,
2017
IFRS 12
January 01,
2017
Statement of Cash Flows - Amendments resulting from the
disclosure initiative
Income Taxes - Amendments regarding the recognition of
deferred tax assets for unrealised losses
Effective date
(annual
periods
beginning onor after
Other than the amendments to standards mentioned above, there are certain annual
improvements made to IFRS that became effective during the year:
Annual Improvements to IFRSs (2014 – 2016) Cycle:
Disclosure of Interests in Other Entities
4.2. Amendments not yet effective
The following amendments with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard:
March 2018
IFRS 2January 01,
2018
IFRS 4January 01,
2018
IFRS 7
IFRS 9
IFRS 9
January 01,
2018
IFRS 9
January 01,
2019
IFRS 10
Financial Instruments : Disclosures - Additional hedge
accounting disclosures (and consequential amendments)
resulting from the introduction of the hedge accounting
chapter in IFRS 9
Applies when
IFRS 9 is
applied
Financial Instruments - Reissue to incorporate a hedge
accounting chapter and permit the early application of the
requirements for presenting in other comprehensive income
the 'own credit' gains or losses on nancial liabilities
designated under the fair value option without early applying
the other requirements of IFRS 9
January 01,
2018
Conceptual framework for Financial reporting 2018-original
Share-based Payment - Amendments to clarify the
classication and measurement of share-based payment
transactions
Deferred
indenitely
InsuranceContracts - Amendments regarding the interaction
of IFRS 4 and IFRS 9
Consolidated Financial Statements - Amendments regarding
the sale or contribution of assets between an investor and its
associate or joint venture
Financial Instruments - Finalised version, incorporating
requirements for classication and measurement,
impairment, general hedge accounting and derecognition.
Financial Instruments - Amendments regarding prepayment
features with negative compensation and modications of
nancial liabilities
30
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
IAS 19January 01,
2019
IAS 28
Employee benets - Amendments regarding plan
amendments, curtailments or settlements
Investmentsin Associates and Joint Ventures - Amendments
regarding the sale or contribution of assets between an
investor and its associate or joint venture
Deferred
indenitely
IAS 28
January 01,
2019
IAS 39
IAS 40 January 01,
2018
IFRS 1 January 01,
2018
IAS 28 January 01,
2018
IFRS 3
January 01,
2019
IFRS 11
January 01,
2019
IAS 12 January 01,
2019
IAS 23 January 01,
2019
Investmentsin Associates and Joint Ventures - Amendments
regarding long-term interests in associates and joint ventures
Applies when
IFRS 9 is
applied
Investment Property - Amendments to clarify transfers or
property to, or from, investment property.the annual improvement to IFRSs that are effective form the dates mentioned below aganist respective standard:
Financial Instruments: Recognition
Amendments to permit an entity to elect to apply
the hedge accounting requirements in IAS value
hedge of the interest rate exposure of a
of nancial assets or nancial liabilities 9 is
applied, and to extend the fair value certain
and Measurements-
continue to
39 for a fair
portion of a portfolio
when IFRS
option to
contracts that meet the 'own use' scope exception
Annual Improvements to IFRSs (2015 – 2017) Cycle:
First-time Adoption of International Financial Reporting
Standards
Annual Improvements to IFRSs (2014 – 2016) Cycle:
Investments in Associates and Joint Ventures
Business Combinations
Joint Arrangements
Income Taxes
Borrowing Costs
4.3. Standards or interpretations not yet effective
The following new standards have been issued by the International Accounting Standards Board (IASB), which have been adopted locally by the Securities and Exchange Commission of Pakistan effective from the dates mentioned below against the respective standard:
IFRS 9 July 01, 2018
IFRS 15 July 01, 2018
IFRS 16 January 1, 2019
Revenue from Contracts with Customers
Leases
Financial Instruments
The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan (SECP):
Effective date
(annual
periods
beginning onor after)
Annual Report June 2018 SINDH EL ASING
31
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
IFRS 1 First Time Adoption of International Financial Reporting Standards
IFRS 14 Regulatory Deferral Accounts
IFRS 17 Insurance Contracts
The effects of IFRS 15 - Revenues from Contracts with Customers and IFRS 9 - Financial Instruments are still being assessed, as these new standards may have a significant effect on the Company’s future financial statements.
The Company expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and therefore will not affect the Company's financial statements in the period of initial application.
5. SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING THE FINANCIAL POSITION AND PERFORMANCE
a) During the year ended June 30, 2018, total issue of 150,000,000 right shares of Rs. 10 each amounting to Rs. 1,500,000,000 to the subscriber of the Company have been allotted by the Board of Directors in their meeting held on January 30, 2018.
b) During the year ended June 30, 2018, the Company has obtained permission to issue certificates of deposit from Securities and Exchange Commission of Pakistan (SECP), vide letter no. SC/NBFC/SLCL/131/2017/39, dated September 27, 2017.
c) During the year ended June 30, 2018, the total lease disbursements made by the company amounted to Rs. 2,448 million. Out of these disbursements, major disbursements, amounting to in aggregate, Rs. 1,770 million, were made to following industries:
- Ceramics
- Food
- Hotel
- Sugar
d) During the year ended June 30, 2018, the Company has disbursed Rs. 500 million against repayment of its long term loan from Government of Sindh.
e) For discussion on the Company's performance, please refer to Director's report.
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented unless or otherwise stated.
6.1 Property, plant and equipments
Owned assets
These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged to income over the useful life of the asset on a systematic basis, by applying the straight line method at the rates specified in note 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively.
Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any, are retired.
An item of tangible fixed assets is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses on disposals of fixed assets, if any, are included in income or expense respectively.
Capital work-in-progress
These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale. Cost also includes applicable borrowing costs. Transfers are made to relevant operating fixed assets category as and when assets are available for use intended by the management.
6.2 Intangibles
These are stated at cost less accumulated amortization and impairment, if any. Amortization is charged to income over the useful life of the asset on a systematic basis by applying the straight line method.
The cost of intangible asset comprises of its purchase price and any directly attributable expenditure incurred in preparing the asset for its intended use.
32
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
6.3 Net investment in finance leases
Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. A receivable is recognized at an amount equal to the present value of the minimum lease payments under the lease agreement, including guaranteed residual value and unamortized initial direct cost which are included in the financial statements as "net investment in finance leases".
6.4 Provision against non performing leases and other loans
Provision against non performing leases and other loans is maintained at a level which, in the judgment of management, is adequate to provide for losses on lease portfolio and other loan portfolio which can be reasonably anticipated. The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries.
Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of the NBFC Regulations, the nature and characteristics of the obligor, current economic conditions, credit concentrations or deterioration in pledged collateral, historical loss experience and delinquencies. Lease and other loan receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal.
6.5 Long term loans and advances
Long term loans and advances are initially recognised at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortised cost using the effective interest rate method. Transaction costs relating to long term loans and advances are being amortised over the period of agreement.
6.6 Financial assets
6.6.1 Classification
The Company classifies its financial assets in the following categories: loans and receivables, held to maturity, available for sale and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the appropriate classification of its financial assets at initial recognition and re-evaluates this classification on a regular basis.
a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets.
b) Held-to-maturity
Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that the Company has a positive intent and ability to hold to maturity.
c) Financial assets at fair value through profit or loss
This category has two sub-categories, namely; financial instruments classified as held for trading, and those designated at fair value through profit or loss upon initial recognition:
i) Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading.
ii) Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with the investment strategy.
d) Available for sale
Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held to maturity investments or (c) financial assets at fair value through profit or loss.
6.6.2 Initial recognition and measurement
All investments are initially recognised at cost, being the fair value of the consideration given including the transaction cost associated with the investment, except in case of held for trading investments, in which case the transaction costs are charged to the income statement.
Annual Report June 2018 SINDH EL ASING
33
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
6.6.3 Subsequent measurement
Subsequent to initial recognition, financial assets designated by the management as loans and receivables, held to maturity, financial assets at fair value through profit or loss and available for sale are valued as follows:
a) Loans and receivables
Loans and receivables are carried at amortised cost.
b) Held to maturity
Subsequent to initial measurement, held to maturity investments are carried at amortised cost.
c) Financial assets at fair value through profit or loss
After initial recognition, investments are remeasured at fair value determined with reference to the period-end quoted rates. Gains or losses on re-measurement of these investments are recognised in income statement.
d) Available for sale
Investments which do not fall under the above categories and which may be sold in response to the need for liquidity or changes in market rates are classified as available-for-sale. After initial recognition, investments classified as available-for-sale are remeasured at fair value, determined with reference to the year-end quoted rates. Gains or losses on remeasurement of these investments are recognised in the equity through other comprehensive income until the investment is sold, collected or otherwise disposed-off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income.
6.7 Basis of valuation of investments
Fair value of the investments in units of mutual funds are determined by reference to Net Asset Value (NAV) rate notified by the Mutual Fund Association of Pakistan (MUFAP) as of the period end.
All regular way purchases and sales of investments are recognised on the trade date i.e. the date the Company commits to purchase / sell the investments.
6.8 Impairment
The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists then the asset's recoverable amount is estimated. Where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to profit and loss account.
6.9 Certificates of Deposit
Return on Certificates of Deposit (CODs) issued by the Company is recognised on a time proportionate basis taking into account the relevant CODs issue and final maturity dates.
6.10 Taxation
Tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss account except to the extent that it relates to items recognized directly in equity or in other comprehensive income, in which case it is recognized in equity or other comprehensive income.
6.10.1 Current
The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credit, rebates and exemption available if any or minimum taxation at the rate of one percent of the turnover whichever is higher. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.
6.10.2 Deferred
Deferred tax is recognized using the balance sheet liability method on all temporary differences between the carrying amount of assets and liabilities used for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is charged or credited to the profit and loss account except deferred tax, if any, on revaluation of investments which is recognized in other comprehensive income.
34
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
6.11 Employees benefits
The Company's employees benefits comprise of provident fund and gratuity scheme for eligible employees.
a) Defined benefit plan (Gratuity Fund)
The Company has a gratuity scheme for all its confirmed employees who attain the minimum qualification period for entitlement to gratuity. The Gratuity Fund is maintained by a trust created and duly approved. The employees are eligible to one basic pay per year. All outgoing employees are entitled for gratuity excluding those who have been dismissed by the Company.
b) Defined contribution plan (Provident Fund)
The Company contributes to contributory provident fund scheme for all its permanent employees. Equal monthly contributions, both by the Company and the employees are made to the fund, at the rate of 10% of the basic salary. Obligation for contributions to defined contribution plan by the Company is recognized as an expense in the profit and loss account.
6.12 Revenue recognition
6.12.1 Finance lease
The Company follows the finance lease method in accounting for recognition of finance lease. The total unearned finance income i.e. the excess of aggregate installment contract receivables plus residual value over the cost of the leased asset is deferred and then amortized over the term of the lease, so as to produce a systematic return on the net investment in finance leases.
Processing, front end and commitment fees and commission are recognized on accrual basis.
Late payment charges are recognized as income when realized.
6.12.2 Income on non-performing lease and loan receivables
Revenue from finance leases is not accrued when rent is past due by ninety days or more. Income on non-performing loan and lease receivables is recognized on receipt basis in accordance with the requirements of the NBFC Regulations.
6.12.3 Interest income
Interest income is recognized on time proportionate basis using effective interest method.
6.12.4 Return on investment
Mark-up income on debt securities is recognised on time proportion basis using the effective yield on instruments on accrual basis.
Dividend income from investments is recognised when the Company’s right to receive the dividend is established.
Gain / loss on sale of investments is taken to income in the period in which it arises.
6.12.5 Financial instruments
All financial assets and liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. All financial assets are derecognized at the time when the Company losses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognized at the time when they are extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on recognition of the financial assets and financial liabilities is taken to profit and loss account.
6.13 Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and the Company intends to either settle on a net basis or to realise the asset and settle liability.
6.14 Repossessed leased assets
These are the assets acquired in settlement of non-performing lease finance. These are stated at lower of the original cost of the related asset and net realizable value of the asset repossessed. Gain or loss on disposal of such assets is taken to income currently.
6.15 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
Annual Report June 2018 SINDH EL ASING
35
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
6.16 Cash and bank balances
Cash in hand and at banks are carried at nominal amount.
6.17 Cash and cash equivalents
Cash and cash equivalents comprises of cash balances and bank deposits. For the purpose of cash flow statements, cash and cash equivalents carried in the balance sheet comprises of cash in hand, balance with bank in daily product accounts and stamp papers in hand.
6.18 Transactions with related parties
Transactions with related parties are carried out at arm's length prices.
6.19 Earnings per share
The Company presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary share holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effect of all dilutive potential ordinary shares, if any.
6.20 Proposed dividend and transfer between reserves
Dividends and appropriations to reserves, except appropriations which are required by law, made subsequent to the balance sheet date are considered as non-adjusting events and are recorded in the financial statements in accordance with the requirements of International Accounting Standard (IAS) 10, ‘Events after the Balance Sheet Date’ in the year in which they are approved / transfers are made.
6.21 Significant accounting judgments and critical accounting estimates / assumptions
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in period of revision and future periods if the revision affects both current and future periods. The estimates and judgments that have a significant effect on the financial statements are in respect of the following:
a) Determining the residual values and useful lives of tangible fixed assets
Management has made estimates of residual values, useful lives and recoverable amounts of certain items of property, plant and equipment. Any change in these estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with corresponding effect on the depreciation charge and impairment loss.
b) Provision against non performing leases and other loans
Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates as explained in note 6.4 of these financial statements.
c) Recognition of taxation and deferred tax
The Company takes into account relevant provisions of the prevailing income tax laws while providing for current and deferred taxes as explained in note 6.10 of these financial statements.
36
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
7. PROPERTY, PLANT AND EQUIPMENT
Year ended June 30, 2018Net carrying value basis
Opening net book value (NBV) 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292Additions (at cost) 1,525,279 77,050 61,000 84,500 - 1,747,829Disposals (NBV) (refer note 7.2) - - - - (574,658) (574,658)Adjustment (2,866,664) - - - - (2,866,664)Depreciation charge (1,887,174) (417,128) (1,579,113) (614,315) (2,062,189) (6,559,919)
Closing net book value (refer note 7.1) 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880
Gross carrying value basisCost 20,016,745 4,218,759 7,946,706 3,163,010 10,832,175 46,177,395Accumulated depreciation (7,624,533) (1,662,261) (6,369,052) (2,857,531) (4,390,138) (22,903,515)
Net book value 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880
Year ended June 30, 2017Net carrying value basis
Opening net book value (NBV) 14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390Additions (at cost) 2,930,664 - - 166,620 10,156,833 13,254,117Disposals (NBV) - - - - (2,282,041) (2,282,041)Depreciation charge (1,888,210) (414,237) (1,578,772) (967,102) (2,080,853) (6,929,174)
Closing net book value 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292
Gross carrying value basisCost 21,358,130 4,141,709 7,885,706 3,078,510 11,406,833 47,870,888Accumulated depreciation (5,737,359) (1,245,133) (4,789,939) (2,243,216) (2,327,949) (16,343,596)
Net book value 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292
Depreciation rate % per annum 10 10 20 33.33 20
Total
----------------------------------------- (Rupees) ------------------------------------------------------------------Description
Leaseholdimprovements
Furniture and xtures
Electrical equipments
Computer equipments
Vehicles
7.1. The cost of fully depreciated assets which are still in use as at June 30, 2018 is Rs. 2.073 million and written down value is nil (2017: Rs. 0.272 million and written down value is nil).
7.2. The following property, plant and equipment were disposed off during the year:
CostAccumulated
depreciationNet book amount Sale proceeds
Vehicle
Honda City 1,250,000 675,342 574,658 1,010,500 Tender Mr. Syed Pir Ali Shah
2017 4,398,270 2,116,229 2,282,041 2,822,066
Description Method of disposal
Particulars of
buyers------------------------------------- (Rupees) ------------------------------------------
Annual Report June 2018 SINDH EL ASING
37
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
8.1 Net carrying value basis
Opening balance 490,583 974,170
Additions (at cost) - -
490,583 974,170
Amortization charge (482,265) (483,587)
Closing net book value 8,318 490,583
Gross carrying value basis
Cost 1,446,941 1,446,941
Accumulated amortization (1,438,623) (956,358)
Net book value 8,318 490,583
33.33 33.33Amortization rate (% per annum)
9. NET INVESTMENT IN FINANCE LEASES
Lease rentals receivable 2,643,680,220 1,300,897,498
Add: Residual value of leased assets 507,751,475 283,267,353
Gross investment in nance leases 3,151,431,695 1,584,164,851
Less: Unearned nance lease income (451,158,103) (199,325,447)
Net investment in nance leases 2,700,273,592 1,384,839,404
Less: Current maturity of net investment in nance leases (628,396,749) (400,989,699)
2,071,876,843 983,849,705
Provision for potential lease losses 9.1 (21,890,256) (11,005,486)
2,049,986,587 972,844,219
9.1 This represents general provision against potential lease losses recorded on the lease portfolio at the rate of 1% of the balance. The movement of provision is as follows:
Balance at beginning of the year 11,005,486 7,000,727
Provision made during the year 10,884,770 4,004,759
Balance at end of the year 21,890,256 11,005,486
9.2 Details of investment in nance lease
2018 2017 2018 2017
Rupees Rupees Rupees Rupees
Less then one year 908,730,874 462,650,140 628,396,749 400,989,699
One to ve years 2,242,700,821 1,121,514,711 2,071,876,843 983,849,705
3,151,431,695 1,584,164,851 2,700,273,592 1,384,839,404
nance lease
Net investments in Gross investments in
nance lease
9.3 The leases executed by the Company is for a term of 3 to 5 years. Security deposit varies as per the requirement of the lessee. The Company requires the lessee to insure the leased asset in favour of the Company. Additional surcharge is charged on delayed rentals. The leases are secured against leased assets and security deposits.
8. INTANGIBLE ASSETS
Software licenses 8.1 8,318 490,583
Note
2018 2017
---------------------Rupees---------------------
38
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
10. LONG TERM LOANS AND ADVANCES
Secured - considered good
Loans to employees 10.1 12,329,779 15,870,584
Auto nance loan 10.2 35,385,851 8,107,466
47,715,630 23,978,050
Loans to employees 3,153,412 3,420,157
Auto nance loan 9,694,406 4,314,725
12,847,818 7,734,882
34,867,812 16,243,168
Provision against doubtful loans 10.3 (356,745) (80,797)
34,511,067 16,162,371
Less: Current portion shown under current assets
Note
2018 2017
---------------------Rupees---------------------
2018 2017 2018 2017 2018 2017 2018 2017
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Total
Balance at the
beginning of the year
Disbursements made
during the year
Repayments received
during the year
Balance at the end of
the year
Chief Executive Executives Non Executives
-
-
-
-
-
-
-
-
14,895,032
387,000
(3,144,171)
12,137,861
15,517,636
2,832,732
(3,455,336)
14,895,032
975,552
343,820
(1,127,454)
191,918
505,548
912,000
(441,996)
975,552
15,870,584
730,820
(4,271,625)
12,329,779
16,023,184
3,744,732
(3,897,332)
15,870,584
10.1 Loans to employees
These represent house loans and car loans provided by the Company to its executives staff as per service rules. House loans are repayable in a maximum of 300 monthly installments and carry mark-up at the rate of 5 percent per annum. Job entitled car loans are repayable in 60 monthly installments and are interest free.
10.2 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these finances ranges from 9.16% to 12.45% (2017: 9.16% to 12.45%) per annum. These finances are repayable within a period of 3 to 5 years (2017: 3 to 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers.
10.3 This represents general provision recorded on the auto finance loan portfolio at the rate of 1% of the outstanding balance. The movement of provision is as follows:
Balance at beginning of the year 80,797 155,646
Reversal of provision - (74,849)
Provision made during the year 275,948 -
Balance at end of the year 356,745 80,797
Note
2018 2017
---------------------Rupees---------------------
11. SHORT TERM INVESTMENTS
Held to maturity
11.1 3,959,611 -
Term deposit receipts
NRSP Micronance Bank Limited 450,000,000 -
Sindh Bank Limited - 900,000,000
11.2 450,000,000 900,000,000
453,959,611 900,000,000
Government Securities - Market
Treasury Bills
10.4 Chief Executive Officer and Directors have not taken any loans and advances from the Company.
Annual Report June 2018 SINDH EL ASING
39
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
11.1
Market Treasury Bills 11.1.1 3,959,611 -
Government SecuritiesNote
2018 2017
---------------------Rupees---------------------
11.1.1 These carry interest rate of 6.6% per annum and have maturity dates ranging from August 16, 2018 to August 30, 2018. The market value of investment in Market Treasury Bills as at June 30, 2018 amounted to Rs. 3.958 million.
11.1.2 As per the requirements of Regulations14(4)(i) of the NBFC Regulations, the Company is required to invest at least 15% of its outstanding funds raised through issue of Certificates of Investments in the Government Securities. As at June 30, 2018, the Company had 16.56% of its funds raised through Certificates of Investments invested in Market Treasury Bills.
11.2 Term deposit receipts
NRSP Micronance Bank Limited 11.2.1 450,000,000 -
Sindh Bank Limited - 900,000,000
450,000,000 900,000,000
Note
2018 2017
---------------------Rupees------------------------------------------Rupees---------------------
11.2.1 This represents investment made by the Company in Term Deposit Receipts for a period of one year and having a maturity date of March 21, 2019. This investment carries mark-up at the rate of 8.50% (2017: 7.00%) per annum.
12. LOANS AND ADVANCES
Secured - considered good
Working capital loan 12.1 654,149,089 449,169,002
Less: Provision against doubtful loans 12.2 (6,500,000) (4,500,000)
647,649,089 444,669,002
Note
2018 2017
---------------------Rupees---------------------
12.1 This represents working capital loan facility provided to customers on markup basis. The mark-up on these finances ranges from 9.04% to 10.30% (2017: 9.05% to 9.50%) per annum. These finances are repayable within a period of one year and are secured against ranking charge by way of hypothecation of fixed assets, unregistered hypothecation charge over stock and receivables, equitable mortgage over properties, personal guarantee, corporate guarantee and post dated cheques from the customers.
12.2 This represents general provision recorded on the working capital loan portfolio at the rate of 1% of the balance. The movement of provision is as follows:
Balance at beginning of the year 4,500,000 2,214,210
Provision made during the year 2,000,000 2,285,790
Balance at end of the year 6,500,000 4,500,000
13. CURRENT MATURITY OF
NON-CURRENT ASSETS
Net investment in nance leases 9 628,396,749 400,989,699
Long term loans and advances 10 12,847,818 7,734,882
641,244,567 408,724,581
14. PREPAYMENTS
851,526 701,992
3,763,955 3,206,819
907,452 931,275
5,522,933 4,840,086
15. OTHER RECEIVABLES
Other receivables 15.1 1,909,700
1,909,700
Prepaid insurance
Prepaid rent
Prepaid membership fee
Note
2018 2017
---------------------Rupees---------------------
15.1 This amount represents front end fee receivable from customers.
40
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
16. CASH AND BANK BALANCES
Cash and other equivalent
Cash in hand 30,911 34,197
Cash at bank
Current account 1,111,016 111,016
Saving account 16.1 410,893,635 267,025,573
412,004,651 267,136,589
412,035,562 267,170,786
Note
2018 2017
---------------------Rupees---------------------
16.1 This represents daily product account (saving account) maintained with several Banks carrying mark-up at the rate of 5.00% to 9.15% (2017: 4.00% to 9.15%) per annum receivable on monthly basis.
17.
2018 2017
350,000,000 200,000,000
3,500,000,000 2,000,000,000
ISSUED, SUBSCRIBED AND PAID-UP
SHARE CAPITAL
(Number of shares)
Ordinary shares of Rs. 10
each fully paid in cash
17.1 The Government of Sindh, held 349,999,993 shares as at June 30, 2018. The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity.
17.2 During the year, the Company has increased authorised share capital and issued, subscribed and paid-up share capital from Rs. 2,000 million to Rs. 3,500 million by passing special resolution in the meeting of Board of Directors of the Company held on January 30, 2018.
18. RESERVES
Capital reserve
18.1 97,933,648 66,266,811
Revenue reserve
114,157,623 82,490,786
212,091,271 148,757,597
Statutory reserve
Un-appropriated prot
Note
2018 2017
---------------------Rupees---------------------
18.1 This represents reserve created in compliance with Non-Banking Finance Companies and Notified Entities Regulation, 2008 (NBFC Regulations). In accordance with NBFC Regulations, the Company is required to transfer atleast 20% of its profit after tax to a statutory reserve. In order to comply with this requirement, the Company has transferred an amount of Rs. 31.666 million, representing 50% of profit after tax, (2017: Rs. 22.377 million) to the statutory reserve.
19.
Lease deposits 19.1 507,751,475 283,266,853
(82,829,232) (5,221,800)
424,922,243 278,045,053
LONG TERM SECURITY DEPOSITS AGAINST
LEASES
Less: Current maturity of security deposits
against leases
Note
2018 2017
---------------------Rupees---------------------
20.
Unsecured
Loan from Government of Sindh 20.1 - 500,000,000
LONG TERM LOAN Note
2018 2017
---------------------Rupees---------------------
19.1 These represent deposit received from lessee under finance lease and are adjustable against the residual value of the asset leased at the expiry of respective lease term.
Annual Report June 2018 SINDH EL ASING
41
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
20.1 This represents long term loan obtained from Sindh Province Pension Fund which is the reserve fund of Government of Sindh. The loan has been received in two tranches amounting to Rs. 250 million each on December 2, 2015 and December 16, 2016 respectively for a period of three years at a rate of return of 6 months KIBOR plus 1%. The loan is unsecured and the interest is payable on quarterly basis. This loan has been repaid in full during the year.
21. CERTIFICATES OF DEPOSIT
(Unsecured)
Certicates of deposit 23,900,001 -
Less: Current portion shown under current liability (12,300,000) -
21.1 11,600,001 -
Note
2018 2017
---------------------Rupees---------------------
21.1. These represent certificates of deposit issued by the Company for periods ranging from 3 months to 3 years and carry mark-up rates ranging from 6.0% to 8.5% per annum.
22.1 The net balance for deferred taxation is in respect of following temporary differences:
Tax effect of:
1,513,294 5,094,857
169,468,127 77,415,545
(160,418,680) (84,104,748)
(10,562,741) 1,594,346
- -
Difference in net book value of net investment
in nance lease
Difference between accounting book value and
tax base of property, plant and equipment
Carry forward tax losses
Others
Note
June 2018 June 2017
---------------------Rupees---------------------
23. TRADE AND OTHER PAYABLES
Payable to vendors 753,550 613,696
Withholding tax payable 298,040 1,113,026
Advance from customers 13,210,578 15,504,829
Accrued expenses 10,775,395 -
Gratuity payable 23.1 2,000,000 35,921
Others 1,613,567 1,607,051
28,651,130 18,874,523
23.1 Movement of provision for gratuity payable is as follows:
Balance as at July 01, 2017 35,921 1,903,741
Net charge for the year 6,895,682 3,806,680
6,931,603 5,710,421
Payments made during the year (4,931,603) (5,674,500)
Balance as at June 30, 2018 2,000,000 35,921
23.2 During the year ended June 30, 2017, the Company had created a separate fund for gratuity for all of it's permanent employees. The fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company. The fund is approved and registered by the Commissioner of Income Tax in accordance with sub-rule (1) of Rule (9) of Part-III of the Sixth Schedule of the Income Tax Ordinance, 2001.
Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs. 11.110 million (2017: Rs. 23.427 million) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company.
Note
2018 2017
---------------------Rupees---------------------
42
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
24. SHORT TERM BORROWINGS
Secured
From banking company 24.1 - 82,498,269
Note
2018 2017
---------------------Rupees---------------------
24.1 This facility is running finance facility with Sindh Bank Limited that carries a markup at three months KIBOR plus 1.00% per annum. Total sanctioned limit is Rs. 200.00 million. This facility is secured against 1st charge over current assets of the Company with 25% margin. Principal amount of this facility has been settled during the year ended June 30, 2018.
25. MARKUP ACCRUED
Markup accrued on:
Long term loan - 19,970,478
Short term borrowings - 1,487,733
Certicate of deposit 43,265 -
43,265 21,458,211
26. TAXATION - NET
Provision for taxation 57,722,056 46,199,982
Less: Advance income tax (50,845,942) (41,747,847)
6,876,114 4,452,135
Note
2018 2017
---------------------Rupees---------------------
Tax assessment/
Years Tax provision tax return
2017 11,429,921 10,377,255
2016 11,306,103 11,970,418
2015 10,168,372 12,757,346
26.1. As at June 30, 2018, as per the treatments adopted in tax returns filed that are based on the applicable tax laws and decisions of the appellate authorities on similar matters, the provision in the accounts for income tax is sufficient as there are strong grounds that the said treatments are likely to be accepted by the tax authorities. A comparison of provision on account of income taxes with last tax assessment is as follows:
28. RETURN ON INVESTMENTS AND DEPOSITS
From nancial assets
Interest / markup on:
Term deposit receipts 21,217,808 61,474,933
PLS accounts 39,977,929 17,534,621
Fund placements - 489,726
Treasury bills 8,523 -
Capital gain on fund placements - 3,506,348
61,204,260 83,005,628
29. FINANCE COST
Mark up on short term borrowings 3,547,826 2,866,929
Mark up on long term loan 10,397,036 27,501,710
Bank charges 176,064 202,069
14,120,926 30,570,708
Note
2018 2017
---------------------Rupees---------------------
27. CONTINGENCIES AND COMMITMENTS
27.1 Contingencies
A letter of guarantee issued on behalf of a client amounting to Rs. 177.483 million (2017: Rs. 224.85 million).
27.2 Commitments
Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 419.42 million (2017: Rs. 767.72 million).
Annual Report June 2018 SINDH EL ASING
43
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
30. ADMINISTRATIVE EXPENSES
Salaries and benets 30.1 41,139,103 27,330,102
Directors' remuneration 34 99,720,868 67,611,193
Rent, rates and taxes 5,838,740 5,202,294
Communication and utility expenses 2,276,624 2,238,141
Travelling and conveyance 5,792,976 5,362,742
Repair and maintenance 1,343,024 1,045,726
Insurance expense 30.2 2,043,850 2,565,715
Auditors' remuneration 30.3 231,000 273,291
Advertising expense 234,618 2,480,865
Depreciation 6,559,919 6,929,174
Amortization 482,265 483,587
Legal and professional charges 1,711,387 1,736,135
Fees and subscription 7,453,543 4,971,218
Printing and stationary 474,730 596,438
Others 2,571,801 1,701,550
177,874,448 130,528,171
Note
2018 2017
---------------------Rupees---------------------
30.1 This amount includes Rs. 19.498 million (2017: Rs. 8.867 million) in respect of employees’ retirement benefits.
30.2 The Company has obtained insurance coverage from Sindh Insurance Company Limited rated "A+" by Pakistan Credit Rating Agency (an agency registered with the Commission) against any losses that may be incurred as a result of employee's fraud or gross negligence. The sum insured of the insurance policy is Rs. 3.850 million (2017: Rs. 3.850 million).
30.3 Auditors' remuneration
Audit fee 179,000 170,000
Out of pocket expenses 25,000 25,000
Other Services 27,000 78,291
231,000 273,29131. TAXATION
Current 31.1 12,756,351 11,429,921
Prior (1,052,666) 664,315
Deferred -
31.2 11,703,685 12,094,236
31.1 The income tax for the year ended June 30, 2018 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).
31.2
Accounting prot for the current year 75,037,359 56,849,188
Tax on income at 30% (2017: 31% ) 22,511,208 17,054,756
- -
Tax effect of lease income and rentals - -
(9,754,857) (5,624,835)
Effect of nal tax under presumptive tax regime - -
Tax effect of tax losses - -
Effect of deferred tax - -
Effect of prior year adjustment (1,052,666) 664,315
11,703,685 12,094,236
32. EARNINGS PER SHARE - BASIC AND DILUTED
Prot for the year - Rupees 63,333,674 44,754,952
Weighted average number of ordinary shares 226,712,329 173,424,658
Earnings per share - basic and diluted - Rupee 0.28 0.26
Relationship between tax expense and accounting prot
Tax effect of difference of accounting and tax
base of owned assets
Tax effect of expenses that are not deductible
determining taxable prot
Note
2018 2017
---------------------Rupees---------------------
Note
2018 2017
---------------------Rupees---------------------
44
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
There is no dilution effect on the basic earning per share as the Company has no convertible, dilutive potential ordinary shares outstanding as at the year end.
33 RECONCILIATION OF MOVEMENT OF LIABILITIES TO CASH FLOWS ARISING FROM FINANCING ACTIVITIES
Long term
loan
Certicates of
deposit
Balance as at July 1, 2017 500,000,000 - 500,000,000
Repayment of long term loan (500,000,000) - (500,000,000)
Proceeds from certicates of deposit - 23,900,001 23,900,001
Balance as at June 30, 2018 - 23,900,001 23,900,001
Description
Liabilities
Total
Chief
Executive Directors Executives Total
Fee - 1,350,000 - 1,350,000
Managerial remuneration 85,771,094 - 15,656,388 101,427,482
Perquisites and allowances 900,000 - 1,877,412 2,777,412
Retirement benet 11,699,774 - 3,217,769 14,917,543
98,370,868 1,350,000 20,751,569 120,472,437
Number of persons 1 6 6 13
Chief
Executive Directors Executives Total
Fee - 750,000 - 750,000
Managerial remuneration 33,377,386 2,125,000 7,344,276 42,846,662
Perquisites and allowances 21,695,316 1,381,250 6,617,412 29,693,978
Retirement benets 8,069,741 212,500 1,897,898 10,180,139
63,142,443 4,468,750 15,859,586 83,470,779
Number of persons 1 6 6 13
Rupees
Rupees
2017
2018
Director's remuneration / fee represents remuneration paid for attending Board and sub-committee meetings.
The Chief Executive and certain employees at the executive level are also provided with the Company owned and maintained car and other benefits in accordance with their entitlement as per rules of the Company.
The remuneration of Chief Executive has been approved on eighteenth Board meeting of the Company held on August 16, 2017.
The current and corresponding years figures includes remuneration of company's executives whose basic salary exceeds twelve hundred thousand rupees in a financial year.
34. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amount charged in the financial statements for the year in respect of the remuneration and benefits to the Chief Executive, Directors and Executives are as follows:
Annual Report June 2018 SINDH EL ASING
45
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
35. RELATED PARTY TRANSACTIONS
The Company has a related party relationship with its Associated Company / Undertaking, Government of Sindh, staff retirement funds, key management personnel and other related parties.
Companies
Sindh Insurance Company Limited
Sindh Leasing Employees Gratuity Fund
Sindh Leasing Employees Provident Fund
Sindh Bank Limited
Sindh Microfinance Bank Limited
Sindh Modaraba Management Limited
Sindh Engro Coal Mining Limited
Arif Habib Limited
Pioneer Cement Limited
Haleeb Foods Limited
Key Executives
Mr. Muhammad Bilal Sheikh CEO
Mr. Rehan Anjum CFO
Mr. Husnain Raza VP/ Head of Credit and Administration
Mr. Farrukh Husain VP/ Head of Information Technology
Mr. Sumair Ahsanullah Admin Incharge
Key Executives
Mr. Salman Hameed Ghazi VP/ Branch Manager Lahore
Mr. Amer Lodhi Head of liability
Ms. Sanam Nizar Ali Manager Compliance
Board of Directors
Mr. Muhammad Bilal Sheikh
Mr. Muhammad Aftab Alam
Mrs. Masooma Hussain
Mr. Naim Farooqui
Mr. Asif Jahangir
Mr. Ali Murtaza Kazmi
Mr. Raja Abbas
46
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
The details of significant related party transactions during the year and balances as at June 30, 2018 are as follows:
2018 2017
Nature of
Relation
Basis of
Relation
Transactions during the year
Prot on bank account and TDR 25,368,934 59,305,120
Sindh Bank Limited
Insurance services
3,934,261 1,356,677
Mark-up accrued
Government of Sindh
Other related
Wholly owned
subsidiary of
Government of
Sindh
30,078,425 27,501,710
Sindh Bank Limited Associated
Company
Common
Directorship 3,534,957 2,866,929
Long term loan
Government of SindhOther related
Wholly owned
subsidiary of
Government of
Sindh
500,000,000 250,000,000
Receipt of funds
Government of SindhOther related
Wholly owned
subsidiary of
Government of
Sindh
1,500,000,000 1,000,000,000
Sindh Bank Limited Associated
Company
Common
Directorship 12,594,423 82,498,269
Redemption of term deposit
Rent charges
Sindh Bank Limited 1,980,000 1,555,165
Salary to seconded staff
4,543,536 -
499,596 -
Others
Other related 1,027,834 -
Remuneration paid Chief Executive Ofcer Directorship 983,370,868 63,142,443
Remuneration paid Directors Directorship - 3,718,750
Remuneration paid Key Management Personnel Employees 20,751,569 15,859,586
Directors' meeting fees Director Directorship 1,350,000 750,000
Sindh Insurance
Company Limited
Sindh Bank Limited
Sindh Bank Limited
Sindh Modaraba
Management Limited
Sindh Nooriabad Power
Company
Common
Directorship
Associated
Company
Associated
Company
Common
Directorship
Associated
Company
Common
Directorship
Common
Directorship
Common
Directorship
Nature of transaction (Rupees)
Associated
Company
Common
Directorship
Associated
Company
Common
Directorship
Associated
Company
900,000,000 -
Annual Report June 2018 SINDH EL ASING
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
35.1 Year end balances Name of related parties
Bank balances Sindh Bank Limited 127,721,100 80,440,933
Rent payable Sindh Bank Limited 1,126,061 -
Prepaid insurance Sindh Insurance Company Limited 780,000 -
Lessee Sindh Nooriabad Power Company 796,526 2,225,132
Term Deposit Receipt Sindh Bank Limited - 900,000,000
Long term loan Government of Sindh - 500,000,000
Markup accrued on bank and
Term Deposit Receipt Sindh Bank Limited - 11,873,828
Markup accrued Sindh Bank Limited - 19,970,478
Short term borrowing Sindh Bank Limited - 82,498,269
35.2 The details of compensation paid to key management personnel are shown under the heading of "Remuneration of Chief Executive, Directors and Executive (note 34)". There are no transactions with key management personnel other than under their terms of employment.
35.3 All transactions with related parties have been carried out on commercial terms and conditions.
36. FINANCIAL RISK MANAGEMENT
36.1 Financial risk factors
The Company’s activities expose it to a variety of financial risks from the use of financial instruments, including:
- Credit risk
- Liquidity risk
- Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board is also responsible for developing and monitoring the Company’s risk management policies.
36.2 Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from the Company’s receivables from customers and investment securities. The Company has established procedures to manage credit exposure including credit approvals, credit limits, collateral and guarantee requirements. These procedures incorporate both internal guidelines and requirements of the NBFC Rules and the NBFC Regulations. The Company also manages risk through credit department which evaluates customers’ credit worthiness and obtains adequate securities where applicable.
36.2.1 Exposure to credit risk
The maximum exposure to credit risk at the reporting date is:
Net investment in nance leases 2,678,383,336 1,373,833,918
Long term loans and advances 47,358,885 23,897,253
Long term deposits 432,600 488,600
Short term investments 453,959,611 900,000,000
Accrued markup 10,689,042 10,480,368
Loans and advances 647,649,089 444,669,002
Cash at bank 412,004,651 267,136,589
4,250,477,214 3,020,505,730
Note
2018 2017
---------------------Rupees---------------------
The aging of net investment in finance lease at the reporting date is as follows:
Past due but not impaired:
up to 29 days
30 to 89 days
48
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
Past due and impaired
90 days to 1 year - -
1 year to 2 years - -
2 years to 3 years - -
more than 3 years - -
Impaired but not past due 10,884,770 4,004,759
Neither past due nor impaired 2,689,388,822 1,380,834,645
Less: General provision (21,890,256) (11,005,486)
Total amount 2,678,383,336 1,373,833,918
Note ---------------------Rupees---------------------
2018 2017
36.2.2 Concentration of credit risk
Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. The Company manages credit risk and its concentration exposure through diversification of activities to avoid undue concentration of risks. For this purpose, the Company has established exposure limits for individuals and industrial sectors.
The Company is exposed to credit risk from its operating activities (primarily for net investments in leases) and from its financing activities, including bank account and other financial instruments. The exposure to banks is managed by dealing with variety of major banks and monitoring exposure limits on continuous basis. The ratings of banks ranges from A+ to AA+.
Details of the industrial sector analysis of lease portfolio are as follows:
Percentage Gross amount2018 2018
% Rupees Sector
Health & pharmaceuticals 0.33% 8,185,000Individuals 1.51% 36,965,400Construction 17.86% 437,389,784Sugar 41.84% 1,024,398,552Transport 0.73% 17,982,000Textile 6.05% 148,044,375Service 9.80% 239,895,570Food 15.57% 381,113,825Miscellaneous 6.31% 154,508,826
100% 2,448,483,332
Financial assets2018
Percentage Gross amount2017 2017
% Rupees Sector
Oil and petroleum marketing 1.12% 12,331,158Health & pharmaceuticals 5.18% 56,977,733Individuals 4.59% 50,536,292Construction 7.25% 79,802,228Sugar 29.07% 319,905,745Transport 3.80% 41,780,444Textile 3.02% 33,267,924Media 13.29% 146,307,304Energy 1.93% 21,240,835Service 9.37% 103,160,410Food 1.93% 21,242,992Miscellaneous 19.45% 214,042,838
100% 1,100,595,903
Financial assets2017
Annual Report June 2018 SINDH EL ASING
49
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
36.3 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The following are the contractual maturities of financial liabilities.
Certicates of deposit 23,900,001 200,000 12,100,000 11,600,001
Trade and other payables 13,142,512 - 13,142,512 - -
43,265 - 43,265 - -
June 30, 2018 37,085,778 200,000 25,285,777 11,600,001 -
June 30, 2017 606,177,227 82,498,269 23,678,958 500,000,000 -
Financial liabilities Total
Over three
months to
one year
Up to three
months
-------------------------------------------------- Rupees ----------------------------------------------------
June 30, 2018
Over one year
to ve years
Over ve
years
Markup accrued
36.4 Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.
Market risk comprise of three types of risk : interest rate risk, currency risk and other price risk, such as equity risk.
36.4.1 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Currently the Company's interest rate exposure arises on net investment in finance lease, term deposit receipts with banks, certificate of investments and bank balances in profit and loss sharing account. The Company monitors the interest rate environment on a regular basis and may change the mix of its portfolio to enhance the earning potential of the Company subject to the above defined guidelines. Other risk management procedures are the same as those mentioned in the credit risk management.
36.4.1.1 Details of the interest rate profile of the Company's interest bearing financial assets and financial liabilities were as follows:
2018 2017
Fixed rate instruments
Financial assets
3,959,611 -
Term deposit receipts 8.15 7.15 450,000,000 900,000,000
Bank balances 5 to 9.15 4 to 9.15 410,893,635 267,025,573
Loans to employees 2 to 5 5 12,329,779 15,870,584 877,183,025 1,182,896,157
Variable rate instruments
Financial assets
8.21 to 13.03 9.15 to 16.91 2,700,273,592 1,384,839,404
9.49 to 12.06 9.15 to 16.91 35,385,851 8,107,466
9.21 to 9.67 9.05 to 9.50 647,649,089 444,669,002 3,383,308,532 1,837,615,872
Financial liabilities
Short term running nance - KIBOR + 1.00 - 82,498,269
Long term loan - 7.14 to 7.53 - 500,000,000
Certicates of deposit 6.2 to 8.5 - 23,900,001 -
23,900,001 582,498,269
Auto nance loan
Effective rate
(In percent)
Carrying amount
Loans and advances
Government Securities -
Market Treasury Bills
Net investment in nance lease
---------------------Rupees---------------------
2018 2017
50
Annual Report June 2018 SINDH EL ASING
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
36.4.2 Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the year end, profit would have increased / (decreased) by Rs. 33.594 million (2017: Rs. 12.551 million). The analysis assumes that all other variables remain constant.
36.4.3 Foreign exchange risk
Foreign exchange risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Company is not exposed to foreign exchange risk at the year end as there is no financial instrument in foreign currency.
36.4.4 Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instruments or it’s issuer, or factors affecting all similar financial instruments traded in the market.
Other price risk arises from the Company’s investment in units of mutual funds and ordinary shares of listed companies. To manage its price risk arising from aforesaid investments, the Company diversifies its portfolio and continuously monitors developments in equity markets. In addition, the Company actively monitors the key factors that affect stock price movement.
A 10% increase / decrease in redemption prices at year end would have increased / decreased the Company’s profit in case of investments classified as ‘at fair value through profit and loss’ by Rs. Nil (2017: Rs. Nil).
36.5 Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Underlying the definition of fair value is the presumption that the Company is a going concern and there is no intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.
IFRS 13 'Fair Value Measurement' requires the Company to classify fair value measurements and fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value hierarchy has the following levels:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset either directly that is, derived from prices.
- Level 3: Inputs for the asset or liability that are not based on observable market data ( that is unadjusted) inputs.
Transfer between levels of the fair value hierarchy are recognised at the end of the reporting period during which the changes have occurred.
As of June 30, 2018, none of the financial instruments of the Company are carried at fair value.
The carrying values of all other financial assets and liabilities reflected in the financial statements approximate their fair values.
Annual Report June 2018 SINDH EL ASING
51
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018
36.6 Financial instruments by category
Loans and receivables
2,678,383,336 1,373,833,918
47,358,885 23,897,253
432,600 488,600
453,959,611 900,000,000
10,689,042 10,480,368
Loans and advances 647,649,089 444,669,002
412,035,562 267,170,786
4,250,508,125 3,020,539,927 Financial liabilities
- 500,000,000
13,142,512 2,220,747
43,265 21,458,211
- 82,498,269
23,900,001 -
37,085,778 606,177,227
Markup accrued
Short-term borrowings
Certicates of deposit
Net investment in nance leases
Long term loans and advances
Trade and other payables
Long term loan
Long term deposits
Short term investments
Cash and bank balances
Accrued markup
June 2018 June 2017
---------------------Rupees---------------------
37. CAPITAL RISK MANAGEMENT
The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business.
The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to its shareholders or issue new shares. The Company is in compliance with the minimum capital requirement of NBFC Regulations.
38. DEFINED CONTRIBUTION PLAN
The Company has contributory provident fund scheme for benefit of all its permanent employees under the title of "Sindh Leasing Company Limited Employees Provident Fund Trust". The Fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company.
38.1 The Trustees have intimated that the size of the Fund at year end was Rs. 19.556 million (2017: Rs. 8.902 million).
38.2 As intimated by the Trustees, the cost of the investments made at year end was Rs.19.177 million (2017: Rs. 8.902 million) which is equal to 100% of the total fund size. The fair value of the investments was Rs. 19.177 million (2017: Rs. 8.902 million) at that date. The category wise break up of investment as per section 218 of the Companies Act, 2017 is given below:
Rupees Percentage Rupees Percentage
Term Deposit Receipt 19,177,856 100% 6,639,006 75%
19,177,856 100% 6,639,006 75%
2018 2017
39. NUMBER OF EMPLOYEES
The total number of employees as at year end were 20 (2017: 21) and the average number of employees during the year was 20 (2017: 21).
40. CORRESPONDING FIGURES
Corresponding figures have been rearranged and reclassified, wherever necessary for the purpose of comparison and better presentation. However, no significant reclassifications have been made during the year.
41. DATE OF AUTHORIZATION FOR ISSUE
These financial statements were authorized for issue by the Board of directors on August 15, 2018
42. GENERAL
Figures have been rounded off to the nearest rupee unless otherwise stated.
___________________Chairman Chief Executive
___________
Annual Report June 2018 SINDH EL ASING
53
I/We __________________________________________________________________________________________________________
of ____________________________________________________________________________________________________________
being member(s) of Sindh Leasing Company Limited holding ______________________________________________________________
of ______________________________________________ who is/are also member(s) of Sindh Leasing Company Limited
th as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 5 Annual General Meeting of the
company to be held on October 18, 2018, at its registered ofce in Karachi.
Signed this__________________________________ day of __________________________________, 2017
ordinary shares hereby appoint _____________________________________________________________________________________
of ______________________________________________ or failing him/her _______________________________________________
in the presence of ______________________________________________________________________________________________
Form of Proxy
Folio No.
Signatureon Rs. 5/-Revenue Stamp
WITNESSES:
1. Signature:
2. Signature:
Note:
1. The Proxy Form should be deposited in the registered of ce of the Company, as soon as possible
but not latter than 48 hours before the time of holding the meeting, failing which; Proxy Form will
not be treated as valid.
2. No person shall act as proxy unless he/she is a member of the Company.
Name:
Address:
CNIC No:
Passport No:
Name:
Address:
CNIC No:
Passport No: