The Crescent Star Insurance Company Limited (CSIL) was once a mediocre general insurance company, which, for a long time, lived off the rent income of its Victorian-era office building on Karachi’s business hub, I.I. Chundrigar Road.

But the company has in recent years taken up rapid diversification, mainly in the food sector. Last week, the company launched “Golden Bowl”, a ‘wok’ concept Pan Asian Restaurant.

Under Crescent Star Foods, the company is already operating the Texas-based fried chicken ‘Golden Chick’ restaurants with plans to open around three dozen outlets in five years.

After a merger between the Crescent Star Insurance Ltd and Picic Insurance Ltd, Crescent Star Foods would become the first retail food chain to enter the stock market, its managing director says

In addition, the food subsidiary acquired the United Arab Emirates-based “Bombay Chowpatty” franchise and a local chain — ‘Café Tiramisu’. The company is also in the process of acquiring 100 per cent interest in ‘Bell Foods Limited’ that owns the ‘Fatburger’ franchise.

Talking to this writer last Thursday, the company’s managing director, Naim Anwar, made an interesting disclosure. The proposed merger of the CSIL and the Pakistan Industrial Credit and Investment Corporation (Picic) Insurance Ltd is in progress.

Picic Insurance, a listed company, has already applied for surrender of its insurance licence. The share in Picic Insurance is currently briskly traded on the stock exchange, with the closing price at Rs4.25 last Thursday and heavy volumes of 2.9 million shares.

“On completion of the merger, Crescent Star Foods would become a listed company, which would be the first retail food chain to enter the stock market,” he said. He explained that through the merger with Picic Insurance, Crescent Foods had taken the short route to the PSX. If it had floated an initial public offering (IPO), the completion of the entire process would have consumed at least a year.

Besides food franchising, CSIL has also diversified in tracking, technology, luxury and the steel sectors. The group comprises Crescent Star Insurance Limited, the core insurance company which is marked as the holding company of subsidiaries Crescent Star Foods (Pvt) Limited, Crescent Star Technologies (Pvt) Limited and Crescent Star Luxury (Pvt) Limited.

The Crescent Star Luxury (Pvt) Limited (CSL) has entered into the retail market for cosmetics and perfumes under the brand name ‘Define’, while Crescent Star Technologies is in the business of vehicle tracking and fleet management services, including supply and installation of devices based on various technologies. It also operates a centralised call centre that connects all group companies.

But regardless of the expansion and diversification, the company’s managing director asserts that insurance would remain the mainstay, with concentration in underwriting policies in motor, health, fire, marine, engineering, travel, livestock, etc.

He said that the diversification into food and cosmetics was basically aimed at targeting the retail market. All efforts were directed at maximising returns on capital. “We expect our lines of business to provide returns of 25-30pc on investments against 5-7pc returns that would be earned if money were to be parked in banks,” he contended.

The company’s biggest investment of Rs450m is in the 30pc controlling equity holding of a PSX-listed associated company, Dost Steels Limited (DSL). Envisioned at the time of its incorporation as the country’s largest re-bar rolling mill with the capacity to produce 350,000 tonnes per annum, the DSL fell upon bad times. Mr Anwar affirms that the outstanding issues have been resolved, ‘energising’ has been completed and trial production would start later this month.

The CSIL had issued right shares in the sum of Rs499m, comprising 49.9m shares of Rs10 each at a discount of Rs4 per share. Mr Anwar stated that since the takeover by the new management in 2013, the paid-up capital of the company had been raised to Rs1.07 billion from Rs121m.

The last released (unconsolidated) accounts and report for the nine months ended Sept 30 showed that the company held Rs1.193bn in assets. For the nine-month period, CSIL earned a profit after tax of Rs90m and earnings per share of Rs1.09 against Rs5m (Re0.07) in the corresponding period of the previous year.

Accumulated profit stood at Rs101m. The company had investments of Rs218m on its balance sheet with the major item of Rs21m was in government securities and varying sums in subsidiaries; the biggest being Rs185m for 62pc equity holding in Crescent Star Foods.

On the assets side, the biggest amount was ‘sundry receivables’ of Rs598m which included balance due from associated company, Dost Steels Limited, which being advance carries a markup at one-year Kibor plus 3pc per annum.

In the core insurance business, the net premium underwritten by the company in the nine months through September amounted to Rs90m, of which the major sum of Rs56m was in the motor business.

Published in Dawn, The Business and Finance Weekly, December 25th, 2017