SERF’ defaulting drama shows ugly side of PSX After a new business plan, rights issue, and AGM – the PSX moves the company to the defaulters segment through an ill thought decision By Ariba Shahid
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efaulter. The word elicits horror from investors and appears in the nightmares of CEOs. Which is why it is relatively understandable Service Fabrics Limited (SERF) has been less than happy with a notification of the Pakistan Stock Exchanged (PSX) that has placed it in the defaulter’s segment. SERF’s crime? Revamping their once dormant business that has existed only in name for years now. For years SERF was dead, and the PSX was happy enough to let it carry on with 100% of its shares floating in the market. There was no real business activity going on in the company and investors were essentially just trading on paper. This once dead company has now very quickly become not just the subject of the PSX’s attention, but also the talk of the town. Finance and stock market whatsapp groups are exploding in equal parts confusion and outrage over why the PSX has placed SERF under A dead company that was finally being revamped, getting a CEO, and coming back to life has been shot down and thrown to the defaulter’s segment. With a spotty past and a heartening hope for revival still alive, the story of SERF is worth telling because it also says a lot about the PSX, and there is also a lesson to learn for others in similar positions.
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What is SERF?
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ervice Fabrics Limited (SERF) was incorporated in December 1987. The principal business of the company is manufacturing and selling of fabrics as per the PSX website. The company, however, had not been operational for years. However, SERF hasn’t been involved in the fabrics business since 2004. At one point in time it had also bought a brokerage firm from Noor Capital and then ended up selling it back to Noor Capital. In 2016, the SECP initiated winding up proceedings on the company. Winding up is the process of dissolving a company. While winding up, a company ceases to continue with business as usual. The purpose of winding up is to sell off stocks, pay off creditors and distribute the remaining assets to shareholders. While the company could not continue its core operations since 2004, some shareholders wanted the business to go into the FMCG sector. This would have been a complete overhaul and a switch in business trajectory. Essentially, shareholders wanted to use the remaining resources of SERF to set-up a new business. For this purpose, key investors approached the Ghani Group to take over the company. The role of management was then assumed by the Ghani Global Group which has been in the business of glass manufacturing, gas and chemical sales. The Ghani Global Group already has two listed companies, both operating in unique industries. Ghani Global Glass
(GGGL) produces Ampoules and Vials for the medical industry, and Ghani Global Limited (GGL) is a holding company that owns 75% equity in Pakistan’s largest producer of medical and industrial gases-Ghani Chemicals or GCIL. In the case of SERF, the group stepped in with an aim to revive the company. This resulted in the Lahore High Court throwing out the winding up proceedings for SERF. The court dismissed the case following shareholder approval of the revival business plan. As per SERF’s website, the company is in the process of changing its name to G3 Technologies with a revised memorandum. Spearheaded under the chairmanship of Aftab Ahmed Chaudhry, former Managing Director of the Lahore and Islamabad Stock Exchange. At this point, the company’s financial position was weak. It had a negative net worth and liabilities of more than Rs 210 million outstanding. To make matters worse, approximately 100% shares were free float which meant no majority ownership. In the absence of majority ownership, there is unlikely to be any entrepreneurial stake or leadership to bring changes. However, what they did have was a solid business revival plan.
The revival plan
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he revival plan for the business entails changing the name to G3 Technologies Limited in order to represent that the company is revising its intended
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