OBJECTIVES: Pak Brunei Investment Company is a joint venture between the Government of Pakistan and Brunei Investment Agency, the sovereign wealth fund of the Sultanate of Brunei Darussalam. The Company commenced operations in September 2007 and has established, within a short period, active platforms for Corporate Finance and Advisory Services, Project and Structured Finance, Treasury/ Trading and Distribution activities as well as Capital Market operations.
Since commencement of business, the Company has successfully arranged syndicated finance of over PKR 33 billion in Greenfield and BMR projects, Restructuring, Mergers, Acquisitions and Strategic Advisory deals. Over the past three years, the Company has maintained its position as the leading investment company in terms of profitability (particularly from core activities), asset build-up, transaction pipeline and quality of human resources.
Pak Brunei's guiding principle is to identify transactions that qualify on the basis of viability, transparency and sponsor credibility but lack access to capital. Each transaction goes through a vigorous due diligence process before qualifying for advice on appropriate capital structure. Financing is arranged through our own resources as well as from other institutional investors. Wherever feasible, options are added to share the upside in order to earn a return commensurate with the higher level of risk.
In the past one year, the Advisory and Strategic Investment team at Pak Brunei has successfully arranged financing for a diverse set of transactions including Greenfield Project Finance, Leveraged Buyout, Management Buyout, Rehabilitation of a distressed project and more recently a Restructuring transaction that included financing as part of a wider package involving establishment of stronger internal control and governance systems. These core activities are supported by an active Treasury to generate liquidity and maintain a distribution network for gradual sell down of exposure. Our ability to churn ensures an active transaction pipeline as the book is not choked by large or unmanageable exposures.
BUSINESS ACTIVITIES ADVISORY AND STRATEGIC INVESTMENTS (ASIG)ASIG's main focus remained promoting feasible projects of national importance - be it new projects, existing ones, or sick units - while capitalising on the hidden value of such entities. Since inception, the group has successfully closed syndicated finance mandates of over PKR 33 billion (both debt and equity) as Lead and Joint Arranger. The scope of Group's experience encompasses management buyout, acquisition finance, project finance and debt re-profiling. ASIG also contributes to broaden PBIC's customer base through client referrals to Corporate Banking and Treasury group. Since last year, ASIG has also started undertaking transactions involving the revival of sick units. Not only did ASIG structure these transactions successfully yielding handsome fee income, but also developed a niche of restructuring projects facing financial distress.
During 2011, ASIG also focused on developing company's strategic investment portfolio through targeting distress assets having a high turnaround potential. Going forward, besides doing conventional investment banking, ASIG plans to strongly build on its expertise as a financial solution provider. With regard to project financing and revival of sick units, preference will be given to projects that will be either export oriented or will produce import substitution while creating job opportunities.
CORPORATE BANKING GROUP (CBG) In a challenging economic environment, the Corporate Banking Group (CBG) continued to cautiously build up its advances portfolio with quality assets having defensive characteristics. CBG focused on building a sustainable income stream by adding medium to low risk assets to its advances portfolio. Assets acquired through ASIG's efforts add an extra element of risk that is vigilantly monitored and properly priced. Despite its cautious approach, CBG remained fairly aggressive in booking assets as the advances/TFC portfolio doubled on a net basis during the year. Being a Participating Finance Institution (PFI) for financing export oriented projects under SBP scheme, the development aspect is the cornerstone of CBG's credit strategy.
During the year, besides strengthening existing corporate relationships, several new corporate clients were also added to the advances portfolio in the pharmaceutical, steel, textiles, power, sugar, food and allied and engineering sectors.
Within PBIC, several synergies exist between CBG and ASIG where CBG acts as a financier to transactions advised by ASIG. The two Groups have worked closely in the past on viable transactions that have a strong development aspect. These synergies also help the company to enhance client interaction, speed up due diligence process and better analyze risk-return tradeoffs. In all cases, transaction size is of vital importance as Pak Brunei works on deals that it can manage on its own and can fully underwrite in case of limited appetite in the market. This ensures faster delivery on mandated transactions. Going forward, CBG plans to strengthen its portfolio quality and further diversification across different sectors of the economy.
TREASURY AND FUND MANAGEMENT During the last couple of years, asset and liability management has become even more critical owing to a volatile monetary environment and continuously transforming money markets dynamics. Treasury Group has been facing the dual tasks of safeguarding balance sheet from interest rate movements as well as capitalising on these movements. Treasury efficiently managed both aspects, also negotiating long term financing lines to manage liquidity mismatches.
Going forward, Treasury will continue to enhance its Institutional relationships in order to mobilise additional resources and for cross selling other services. Applying for Primary Dealership for government securities is also a target for Treasury Group.
CAPITAL MARKETS Throughout the year, our strategy remained defensive and focused towards dividend yielding stocks. Despite a tough year for local bourse, our Capital Markets Group (CMG) was able to post a positive return on equity portfolio.
Going forward, CMG will keep following a cautious investment strategy by focusing on defensive and fundamentally strong stocks.
RISK MANAGEMENT We understand the need to continually enhance and enforce proactive risk management in the organisation. During the year, the Centralised Risk Management Unit was divided into Credit Risk Management (CRM) and Middle Office & Operational Risk Management (MOOR) with senior level resources on each side. The move was in anticipation of growing scale of operations where the different businesses requiring risk watch could receive closer attention.
We have a holistic view on risk management, be it credit, market or operational risk which are monitored across all asset classes and functional areas of the Company.
ENTITY RATING During its rating review process in 2011, PACRA maintained the long term rating of AA thereby denoting its confidence in the Management Team and its accomplishments so far, and the sound financial health of the Company.
FUTURE PLANS To capitalise on the opportunities in the asset management industry, PRIMUS Investment Management Limited, a 100% subsidiary of PBIC, was established in 2011 with a capital base of PKR 250 million. The company has already acquired licenses from Securities Exchange Commission of Pakistan for Fund Management and Investment Advisory services and is expected to launch its first Fund in the first quarter of CY 2012.
PRIMUS Investments Management Limited aims to provide investment avenues across a broad spectrum of asset classes including traditional as well as alternative investments such as commodities and financial derivatives. PRIMUS will also provide customised discretionary fund management solutions to institutional and retail clients.
Pak Brunei also plans to establish a strong footprint in the SME sector through a well structured initiative to meet the needs of this critical sector of the economy.