KARACHI: Problems of Hascol Petroleum Ltd, which has been in trouble since 2018 partly for making inaccurate entries in its financial accounts, seem to be mounting as its CEO landed behind bars on Tuesday.

A statement by company chairman Sir Alan Duncan said a trial judge refused the confirmation of bail applications from a number of individuals, including CEO Aqeel Ahmed Khan, in an inquiry being held by the Federal Investigation Agency (FIA).

Mr Duncan said the legal counsel representing the CEO believes the court may grant him post-arrest bail. Meanwhile, the company’s board has authorised chief financial officer Amad Uddin to exercise the authority of the CEO until the issue is resolved.

The official statement carried no specific details of the case in question. However, the latest financial accounts of the oil marketing company mention that the FIA started a formal inquiry during the second half of 2021 into the “defaults incurred at banks on account of the holding company”.

The inquiry focuses on individuals working for the holding company — both management and the board of directors — as well as the National Bank of Pakistan. A formal FIR was registered in January 2022 followed by a preliminary challan in a high court under the Anti-Money Laundering Act against 32 individuals.

However, the company asserted in notes to the financial statements that neither the inquiry nor the challan was against the holding company and that it expected “no outflow of economic benefit” as a result of this case.

Hascol Petroleum’s revenues have plummeted, losses risen and loans skyrocketed, sending its share price down from over Rs300 four years ago to less than Rs5.55 now.

It’s now in the middle of seeking approval from creditors for its plan to rehabilitate the company through “restructuring/rescheduling, settlement and repayment” of financial obligations.

The company filed a scheme of arrangement with the Sindh High Court, which ordered it in November 2022 to convene meetings with banks for their approval.

The restructuring effort aims at replacing short-term expensive debt with long-term affordable debt as well as some new equity. The company’s current liabilities outstrip current assets by a wide margin, which reflects poorly on the company’s ability to pay off its loans that’ll fall due in the short run. The company’s net consolidated loss amounted to Rs9.4bn for the first nine months of 2022 versus a loss of Rs4.3bn a year ago.

The company’s major shareholder is Swiss energy giant Vitol Group, which increased its equity stake from 25 per cent to 40pc in 2020.

Published in Dawn, February 22th, 2023