KARACHI, Oct 18: The Modaraba sector is coming up with mixed financial results for the latest term.

On Friday, B.R.R. International Modaraba announced net profit amounting to Rs103.2 million, representing 70 per cent growth over net profit of Rs69.5 million earned by the Modaraba the previous year. B.R.R (short for Bismillah-hir-Rehman-in-Raheem) Modaraba, listed in 1985, was the first among modarabas to enter the country’s capital market.

A day earlier on Thursday, First Imrooze Modaraba—the modaraba trading at the highest market price for its certificate, at Rs39— posted profit after tax in the sum of Rs2.2 million for the quarter ended September 2003, which was nearly half of the profit of Rs4.1 million reported in the corresponding period of the previous year.

A day before that on Wednesday, Fayzan Manufacturing Modaraba— which claims to be the first and the largest manufacturing modaraba in the country—announced financial figures for nine months ended September 30, posting profit at Rs87.3 million; for comparable six months in 2002. The Modaraba had made Rs79.1 million in profit. Fayzan is a specific purpose modaraba formed to construct, operate, manage and own a Polyester Staple Fibre (PSF) Spinning and Processing Plant at the premises of ICI Pakistan Limited under the Licence Agreement with ICI. Fayzan Modaraba commenced business operations from April 1, 2002.

It is difficult for the best of stock picking gurus to understand the market mood. Only nine of the 35 publicly quoted modarabas are currently trading at prices higher than their par value while the rest are still languishing at varying discounts. The investors apathy towards the Modaraba sector, even in these bullish times, is appalling, particularly since it is difficult to identify a cause. It couldn’t be the returns on investment, for in line with previous years, as many as 20 Modarabas have already declared dividends in 2003— quite a few, at rates much higher than the average market yields.

Ever since the regulators began tightening screws on banks, leasing companies and modarabas to expand their equity base, the country is witnessing a bit of merger & acquisition (M&A) activity.

More than seven Modarabas have so far merged not merely to comply with the minimum capital requirement, but also to make themselves bigger and stronger to be able to survive in the intensely competitive financial market.