Bahauddin Khan, Managing Director, Pak Oman Investment Company says that the development financial institution has a well-diversified portfolio with a presence in nearly all key sectors of the economy. An OER interview
Can you give us a brief background of Pak Oman Investment Company?
Pak Oman Investment Company is a development financial institution (DFI) formed in 2001 as a joint-venture between the governments of Pakistan and the Sultanate of Oman, Pak Oman Investment Company (Pak Oman) entered a fiercely competitive market and in barely five years through a combination of effective team work, excellent human resource, market positioning and a visionary Board of Directors, evolved into a progressive and smart working environment with a solid reputation and a bright future.
The company has equal equity participation by each sovereign sponsor. Pak Oman is a banking institution with a special focus on promoting two way business flows with Middle East in general and Oman in particular. These objectives are being achieved through its core business areas of corporate and investment banking and capital market/treasury operations.
Pak Oman has a subsidiary by the name of Pak Oman Asset Management Company and an associated company by the name of Pak Oman Microfinance bank Ltd.
Pak Oman Investment Company has a medium to long-term rating of AA+ (Double A Plus) and short-term rating of A1+ (A one Plus) as per JCR-VIS Credit Rating Company. This rating indicates a superior quality of credit and strength of protection factors. The assigned rating is primarily driven by development of a sustainable profit base for the company and its relative position amongst peer group institutions.
The company has also been assigned a corporate governance rating of CGR-9 by JCR-VIS Credit Rating Company. The rating denotes a very high level of corporate governance and is the result of adoption of best practices within the company.
What is the mandate of the company?
The company’s business focus is in Pakistan but it also has the mandate to establish subsidiaries and offshore offices. Its mission is to provide cutting edge financial solutions to meet the requirements of its target customer base with emphasis on customer satisfaction. The company’s focus is to support economic development in both sponsoring countries and on maximising returns.
Are there certain core sectors that the company focuses on?
Pak Oman’s loan portfolio is a well-diversified portfolio with a view to keep the concentration risk at manageable levels and thus has its presence in almost all key sectors of the economy. However there are certain sectors where Pak Oman has been lending actively which are namely the textile, energy, infrastructure and microfinance in the banking sector.
The company started with a seed funding of $100mn. What is the size of the fund as of date?
Pak Oman has maintained steady growth in its asset size over the years. Our assets have already reached around $400 million. These assets are backed by equity, deposits and local market borrowings. We are actively exploring borrowing from international development financial institutions to finance infrastructure and development oriented projects in Pakistan.
Can you share some details of the projects or companies that Pak Oman Investment Company has invested both in Oman and Pakistan?
Pak Oman is the second largest of seven Development Financial Institutions (DFIs) which have been formed in a partnership with a sovereign country besides Pakistan. Pak Oman is the leading DFI operating in Pakistan. The core activities of the company entail an active infrastructure loans and project loans (both long and medium term). Since inception Pak Oman, over 15 years, has made cumulative disbursements of $0.49bn to various sectors of the industry. It has played a key role in financing laying of the first private sector fiber optic cable connecting Pakistan with Oman through Fujairah. In addition, it has had been part of various syndicates, being put together to finance the new projects in the power and infrastructure sectors. Its corporate banking setup is regarded as one of the most active amongst the DFIs and maintains the largest and one of the cleanest portfolio of corporate loans and leases among its peer group. A snap shot of the corporate loan book of Pak Oman clearly demonstrates a well-diversified and well spread portfolio with presence in nearly all key sectors of the economy.
Pak Oman has also played a role of business match maker for Pakistani companies interested in doing business with Omani counterparts and vice versa. We arranged interface of Omani business groups like W J Towell with Pakistani companies like Garibsons (the largest rice processors from Pakistan), Ismail Industries (one of the largest confectionary companies in Pakistan), Nirala Foods and Chaudhry Dairies etc., for export of their products to Oman. Till date, Garibsons has been actively working with W J Towell. I would like to add that we have a representative office in Muscat not only to liaise but also to look out for business opportunities.
What are the company’s plans for the next two to three years?
Pakistan’s economic activity is projected to gradually accelerate over the medium term reaching 5.0 per cent in 2017 and 5.4 per cent in 2018, building upon 4.7 per cent GDP growth at factor cost in 2016. The economic growth is primarily driven by public and private consumption and is also a result of infrastructure projects under the China Pakistan Economic Corridor (CPEC) and related public investment. CPEC can also help accelerate growth in the domestic construction industry, as well as increase electricity generation.
Riding on the improved economic indicators, Pak Oman, by virtue of its active presence in the local debt market, plans to continue increasing its loan book by seeking strong and reputable names backed by solid business models, in the local industrial sectors. In doing so, Pak Oman intends to maintain its position as the leading DFI. One of our objectives is infrastructure development and we are looking forward to actively participate in the debt financing opportunities in upcoming CPEC related infrastructure projects.