KARACHI, Feb 9: Chairman Rashidullah Yacoob has gone missing and with him perhaps much of the financial assets that he controlled, including millions of rupees that the shareholders had invested in half a dozen financial sector companies of the Prudential group. The latest directors’ report to the accounts for financial year 2001, released by the Prudential Investment Bank Limited alleges that the chairman is “absconding with sum of Rs233.2m, as loans receivable from him”. Directors say that “fake/benami advances were created by the chairman” and also that these were “inter-mingled with other group/associated companies”. Directors also say that NAB is in the process of investigation, trying to ascertain the total amounts due from the chairman.
On the advances of Rs233.2m, the Bank also owed Rs80.5m in mark-up, the aggregate of which works out to almost 44 per cent of the Prudential Investment Bank’s total asset of the book value of Rs721 million.
At the stock exchange the 10-rupee share in Prudential Investment Bank Limited is trading at only Rs1.20. But the other listed financial assets of the Group are in more terrible shape. Prudential Stocks Fund’s share is priced at 50 paisa; the three Modarabas — first, second and third, at market prices varying between 45 to 80 paisa and the 10-rupee share in the Prudential Discount & Guarantee House is available for 60 paisa, with no buyers. The combined paid-up capital of those six group units comes close to a billion rupees — at Rs961m.
The auditors of the Prudential Investment Bank write in their report that no provision had been made for the amounts due from the chairman, which if made would have increased the loss for the year 2001 to Rs293.7 million, instead of the reported loss of Rs37.3m and the accumulated losses of the Bank would stand at Rs315m, instead of Rs58.8m.
Because of the excessive bleeding, the Bank understandably needs injection of liquidity and the auditors note: “Management believes that the future operations of the bank will not be adversely affected as the management is working on a plan for injection of fresh equity by directors and other prospecting investors, and the matters lying with SECP will be satisfactorily resolved, therefore, accompanying financial statements have been prepared on going concern basis”.
Interestingly, if the funds were being siphoned off through fake and benami advances, did the company auditors blow the whistle? The question is anticipated by the auditors and they make this as the last comment in their report to accounts for 2001: “The accounts of Prudential Investment Bank for the year ended June 30, 2000 were audited by us and vide our report dated June 02, 2001, were expressed a disclaimer on those accounts”. That raises many more questions. If the Central Bank was unable to monitor the Prudential Investment Bank’s financial affairs — which it was supposed to have done in the first place — why did it hesitate to move after the auditor’s report — but before the alleged person could make good his escape?
In the face of enormous amounts of advances that could well be unrecoverable, it is difficult to assess the actual strength of the balance sheet. Not including the doubtful advances, the Bank’s equity appears in the positive to the extent to Rs85.3m. But there also is ‘deficit on revaluation of investments’ amounting to Rs21.6m. The Bank held Rs381.2m in deposits on which return amounting to Rs46.9m was charged during the year, making up the largest amount on the expenditure side. The Bank credited in its books Rs29.8m as ‘return on financing’, but much of that stood wiped out by the loss of Rs21.8m from investments. The expenditure in the aggregate, exceeded the Bank’s income by Rs65.0 million.
Under the gloomy circumstances, it must have required a great leap of faith on the part of the director to remain optimistic: “If amount of fake advances are recovered and new business opportunities are explored, the bank will become viable and additional investors would be invited to inject the amount required, to make the bank a viable unit”.
