Kohinoor Industries Limited (PSX: KOIL) was set up under the Companies Act, 1913. It is a public limited company that initially manufactured and sold yarn. But those operations were shut down in 2007. The premises have been rented out instead and the rental income is the main source of revenue.
As at June 30, 2021, over 18 percent of shares were held by each of the following: directors, CEO, their spouses, and minor children collectively, and foreign companies. In the former category, Mr. M. Naseem Saigol holds the majority of the shares. The general public owns about 57.5 percent shares, followed by 4 percent in insurance companies. The remaining about 2 percent shares are with the rest of the shareholder categories.
Historical operational performance
Revenue for the company primarily comes from rents for the factory building that has been rented out after the manufacturing operations were shut down. Other than this, the company incurs some administrative expenses; finance expenses are minimal, while other income figures have been fluctuating over the years.
Looking at the last few years, specifically in FY17, rental income registered a 10 percent growth from Rs 30 million in FY16, to Rs 33 million in FY17. Administrative expenses more than doubled year on year, from Rs 7 million in FY16 to Rs 18 million in FY17. This was attributed to a rise in salaries expense that was also the biggest component of the administrative expense. Other income, on the other hand, that contributed a substantial amount of Rs 59 million in FY16 coming largely from an increase in fair value of investment property, fell to Rs 1 million in FY17. Thus, net profit fell considerably from Rs 73 million in FY16 that had been the highest thus far, to Rs 12 million in FY17.
In FY18, revenue, that is, rental income increased to Rs 37 million, registering a growth of 12 percent. Administrative expenses also increased to Rs 24 million, due to a number of factors such as rent, rate and taxes, and repairs and maintenance; the latter jumped from almost Rs 75,800 to over Rs 5.3 million. Simultaneously, other income also inclined, from Rs 1 million in FY18 to Rs 41 million in FY18. This was derived mainly from an increase in the fair value of investment property. Thus, there was some improvement in the bottomline that grew from Rs 12 million in the previous year, to Rs 34 million in FY18.
The increase in rental income in FY19 to Rs 48 million can be attributed to the general inflationary pressure experienced in the economy. Administrative expenses, on the other hand, were reduced to Rs 20 million. A major part of the decrease was seen in salaries expense; this is also reflected in the number of employees going down from 24 employees in FY18, to 15 in FY19. Moreover, other income also reduced during the year, to Rs 7 million, compared to Rs 41 million seen in FY18, as changes in fair value of investment fell from Rs 38 million to Rs 6.5 million in FY19. Thus, net profit reduced slightly to Rs 28 million.
Rental income inFY20 was recorded at Rs 56 million while administrative expenses fell for the second time in a row. Most of the decrease in value was observed in the repair and maintenance expense, which was reduced from Rs 5.7 million to Rs 1.7 million. Other income, on the contrary, again picked up in FY20, recorded at Rs 35 million. This increase was again attributed to the change in the fair value of investment property, but an additional Rs 2 million was also contributed by the return on bank deposits. Thus, net profit was posted at an all-time high of Rs 88 million.
Despite the Covid-19 pandemic, the rental income of the company was undisturbed as it continued to grow during FY21; it was posted at Rs 62 million for the year. Administrative expenses, however, rose from Rs 16 million to Rs 26 million, due to repair and maintenance expenses that were recorded at Rs 6.3 million. With other income also posted at a lower Rs 25 million, net profit halved year on year to Rs 44 million.
Given that the company has no debt obligations except for the sponsor’s loan, which is interest-free and “not payable on demand but payable at the discretion of the company”, therefore the company has sufficient assets to fulfill its obligations. As a result, there is no doubt about the company’s ability to continue as a going concern. Considering that there has been no impact on the company’s revenue during the pandemic, in the future too, the company will continue to earn rental income; although the company’s annual report states that it is looking for “viable business propositions” that could further improve the company’s financial performance, in addition to continuing to rent out its premises.