08 08 Help is here. But will kiryana stores take it? 12 Scrappy, cunning, and unrelenting - how Faisal Movers dethroned Daewoo 18 18 Indexing the sun Ammar H Khan 20 Malik Riaz is still a banker but not by choice 22 To recover from the floods, the right investments must be made Uzair Younus 23 23 The mechanics behind the panadol shortage 28 Propelling financial inclusion through female participation 23 08 12 CON TENTS Publishing Editor: Babar Nizami - Joint Editor: Yousaf Nizami Assistant Editors: Abdullah Niazi I Sabina Qazi - Sub-Editors: Mariam Zermina | Basit Munawar Editor Multimedia: Umar Aziz - Video Editors: Talha Farooqi I Fawad Shakeel Reporters: Ariba Shahid I Taimoor Hassan l Shahab Omer l Ghulam Abbass l Ahmad Ahmadani Shehzad Paracha l Aziz Buneri | Maliha Abidi | Daniyal Ahmad | Ahtasam Ahmad | Asad Kamran Chief of Staff: Maliha Abidi - Regional Heads of Marketing: Mudassir Alam (Khi) | Zufiqar Butt (Lhe) | Malik Israr (Isb) Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk Profit
The situation it seems is not in their control. What if a big retailer opens up right next to them? For example, a fairly large-sized grocery store in Bahawalpur saw a dreadful decline in sales because Imtiaz opened up a branch nearby, forcing the smaller retailer to
The neighbourhood kiryana retailers are under a constant threat. On the one hand, we have the venture capital backed quick commerce startups, who have made their intentions of disrupting the kiryana stores public. While one such startup, Airlift, has been reduced to ashes by a harsh turn in startup investments, Pandamart and a few others still remain. On the other hand, we have hyper markets such as Metro, Alfatah and Imtiaz, with the potential to kill many small retailers by opening just one of their branches in a locality.
eventually exit that locality.
There is also an opportunity for big mon ey to be made and it all starts with enabling the small grocery retailer to be able to make more money than it does now.
like AlFatah and Metro are able to do.
By Taimoor Hassan
conventional method of doing business on pen and paper is as old as it is inefficient – we can all agree to that. All of us have popped over at kiryana stores at some point in our lives. These are small general stores or even smaller pan shops. We’ve also seen kiryana store owners recording transactions on shabby registers, but only for transactions on credit so that they remember who owes them what. They are ob viously not recording each and every transaction of walk-in customers at the store.
They could of course, but it would be
A league of startups is trying to digitise small retailers. This might change retail altogether in Pakistan
The
So what do you do when you are faced by the threat of a big retailer or a quick commerce player opening a new dark store nearby? A new league of startups in Pakistan thinks that these small retailers that get disrupted by big ones have fundamental ‘flaws’ in their operations that make them easy prey for the big boys. These flaws can be fixed by digitisation of small retailers, and if done successfully, it would bring substantial changes in the entire retail ecosystem.Itstartswith something as small as equipping the kiryana retailer with a machine to record transactions and ends with a gold mine of retail data and influence how decisions are made at the top in the retail chain, which would trickle down through the entire chain of stakeholders to end consumers. It also ends with smaller retailers having the opportunity of aggregating at a platform to negotiate better margins which only currently hypermarkets
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How to be efficient in business
This number is small because these systems cost a hefty amount to buy and deploy. Pop kiryana stores are not likely to have such volumes and these systems would add to their overall costs. The systems to digitise retailers in this manner can come at a cost of Rs100,000 or over that upfront.
A new crop of startups in the country is eyeing this opportunity keenly. It is in this climate that Nielsen, the iconic American data company famous for its TV ratings business, is making a comeback, after two years of shutting operations in Pakistan. Nielsen should be worried right now. Relaunching its retail audit business for the Pakistani market when there are so many new players in what used to be their dominant ground will be challenging. But this will provide a much-needed impetus to the industry to digitise more retailers thereby creating the space to collect, create and convert data into insights for distributors as well as manufacturers. This is what Nielsen does for manufacturers too.
Not every kiryana store fits the criteria of becoming a SnappRetail or an Alladin customer. The systems we are talking about are sophisticated enough that only retailers which are at a certain scale will have the utility for such a system and would be able to derive benefit from it. SnappRetail CEO Adeel Rasheed tells Profit that the scale of a target customer is a retailer who has Rs1.5-3 million worth of sales monthly, which is an estimated target market of 200,000300,000 retailers according to their estimates. Adeel further estimates that 5,000 or even less than that number of retailers are digitised with these systems right now, on their own.
Meet SnappRetail and Alladin Informatics
In this ecosystem of retail digitisation, SnappRetail plans to first of all bring that hardware and software to the retailer through which it is able to record transactions.
Amer Pasha, founder and CEO Alladin Informatics
Needless to say, he is a man of stature and when people such as him are building something, there are great expectations. Pasha does not quite fit the mould of Pakistani start up founders, but neither do the folks at SnappRetail. Both SnappRetail founders and Pasha are older than the other founders in the startup ecosystem, and while it maybe believed that start-ups are mostly run by younger people, it would appear that such retail digitisation does not require the aggressiveness of a young founder to pull, say an an Airlift-style blitzscal ing. Digitising retail the way SnappRetail and Alladin Informatic want to do is going to be a tough and slow journey, which would entail driving behaviour change of retailers, used to working on pen and paper since decades, towards digitisation.
If these stores are equipped with the right systems to record the movement in their inventory, they can bring about a fundamen tal change in how retailers carry out their business. They can stock inventory based on precise sales data, follow trends, restock on a timely basis, reduce theft and wastage, keep better margins products over products that eat away margins, eventually increasing growth in revenue and profits, and ultimately getting bigger and focusing on expansion.
a herculean task given how much writing it would involve and how fast they would need to be especially at peak hours. Nostalgia aside, what is happening here is that they are are missing out on deep insights which would enable their business to grow; insights that can be ob tained when every transaction is recorded and analysed to figure out what exactly is selling at the store and what is not, which stock items are the most in demand and must be always kept in stock, and which ones can be discarded altogether. Its an inefficient operation which hinders their growth “Small retailers have a cash flow problem. And because they have a cash flow problem, they have frequent stockouts which drags their growth,” says Amer Pasha, founder and CEO of Alladin Informatics.
We will reverse the trend of what has happened in the developed markets. By saving local communities and heritage created by the historical presence of kiryana stores, and not have an environment where large super markets killed them
The question is, which systems can bring about these efficiencies? And the answer sim ply put, is what we see when we get groceries at AlFatah or Imtiaz. An oft misrepresented fact is that if you use an app your business will be very efficient. It is not so. The app could be both inefficient and inaccurate if not used correctly. Manual entries are authentic but like mentioned above can be time consuming, unless of course, the app being used has the functionality to automatically record a sale each time it is Basically,made.itisthe combination of hardware and software being used together at retailers such as Imtiaz and Alfatah, or any other reasonably large (in terms of variety of option being sold) grocery stores in urban localities in the country. A barcode scanner, a printer that prints receipts and a tablet or a computer comprise what is collectively called a point-of-sale (POS) system, is the answer. This stores entries not just for recording inventory
On
been building Alladin Informatics, which has not yet raised a round.
September 7, one of the startups from this league of startups an nounced a $2.5 million raise in preseed funding from funds including Pakistan’s Zayn Capital, and global investors Antler and Century Oak Capital. Founded by Adeel Rasheed and Moazzam Ali Khan, both with experience in FMCG retail at places such as Unilever and L’oreal, SnappRetail is currently the first one to announce funding and come forth with its plans. But it is not the only one. Alladin Informatics has been operating in stealth mode and has at its helm Pasha. A seasoned business executive with experience in FMCG retail at Recckitt Benckiser and Coca Cola, Pasha’s career includes a stint as country manager for Visa in Pakistan and also senior director of sales looking after Central Europe, Middle East and Africa for the global payments giant. For the last two years, he has
“The retailers we are targeting take about Rs100,000 home in earnings for the month. Such retailers are at a cusp where
movements and transactions but also collect ing mammoth data which can be turned into meaningful insights for better decisions to grow the business.
STARTUPS
There is, however, a lot more to this digitisation than just being a challenger to Niel sen’s business. Before we get into the details about how such digitisation would potentially unravel, there are intros to be made and some other plans to be detailed.
“The systems are sophisticated. Retail ers would have the option of pressing a button to mark a transaction as a credit sale and it will pop up on their digital ledger as a credit sale, while adding onto their total sales data for the day,” says Rasheed.
Moazzam Ali Khan, co-founder at SnappRetail
B
The key here is monetising data. The machines, while they will be making transaction recording easier, would be collecting data of the transactions which would be converted into insights for the retailer for suggesting to retailers on decisions crucial for the growth of the business. For instance, based on the data over any given time, SnappRetail or Alladin can provide reports and suggestions on what are the best running SKUs at a particular retailer that they need to have backup inventory of, or which items are running out of stock and need to be replenished. These insights could be crucial to reduce out of stock items, replacing non-running items with the items that are running, eventually helping the retailer increase sales and profits.
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You see there is another angle to the data collected in this arrangement. For a
The loans would serve the working cap ital needs of the retailers to eventually help them grow bigger and even expand branch es. For the startups, these loans, provided through collaborations such as with banks and/or lending-focused fintech companies, would be a lucrative source of revenue as well in form of a cut in the interest paid by the retailers.SnappRetail told us that they also plan to embed digital payments in the POS system which will also add to their revenue each time they take a cut from the MDR charged to a
long while now, banks have avoided lend ing to SMEs such as these retailers because there isn’t enough digitisation here to collect enough data points for credit scoring for the purpose of giving out loans. Startups before in many domains have been gunning to collect the right data to extend loans to these retail ers. B2B eCommerce apps record purchases by neighbourhood kiryana stores, whose owners decide how much to purchase intuitively rather than in an organised, calculated and precise manner. These retailers not only make purchases from the B2B apps, they do it from the largely informal wholesale markets as well, and the purchases from there would not be recorded in these apps. This data, hence, might not be an accurate predictor of a retail er’s credit worthiness.
On other hand, ledger apps allow manual recording of cash transactions. Being manual can bring some inefficiencies in the data. While all of these startups’ efforts to collect data are much respected, SnappRetail and Alladin Informatics or their likes to come will have a better shot at collecting more accurate data on which credit scoring could be built. Each transaction that goes through a barcode scan with a printed receipt will be accurate, reliable and more representative of a retailer’s financial position for better credit scoring.
This does not look like an impressive business, certainly not the one with a pitch that would get you $2.5 million from venture capital investors that are overly cautious these days. But tell them what data you can gather in this arrangement and what you can do with that data and you have a model that investors will put money in these days as well.
This certainly wouldn’t cover the costs of deploying the machines for a few years. SnappRetail has currently deployed these systems at 100 stores, which they plan to take to 1,000 stores in a few months time. Even if they take it to 1,000 stores, the cost of deploying these machines would be approximately $450,000 dollars for 1,000 retailers, while the revenue each month from that would be $20,00 only at $20 for the month from each retailer.
In the bullseye, we have to keep the retailer focused on a few points: Increase their revenue and decrease their costs are two of them
Payments and lending
getting to digitisation is not a complexity for them but they haven’t done it yet for one reason or the other. But if they do, it will help them grow,” says Rasheed.
To increase the willingness of retailers to sign up for such systems, SnappRetail brings them these systems without any big upfront charges and, instead charges a smaller rental amount, which they have currently priced at approximately $7, with eventual plans of increasing it up to $20 per month.
they will be equipping retailers further with different components to help these retailers grow.
“Printed receipts help increase cus tomers. There is double digit inflation and customers are very particular if they are being charged as per the price and it helps with their budgeting as well through printed receipts,” says Khan. “Customer magnification because of that is the immediate effect that we are seeing with our systems. In the bullseye, we have to keep the retailer focused on a few points: Increase their revenue and decrease their costs are two of them,” he adds. He out lines that the third point of focus on retailers would be to provide them with access to credit for working capital.
oth Alladin and SnappRetail are using this digitisation as a strategy to pene trate the market, and after building a strong relationship with the retailer,
merchant. SnappRetail told us they plan to do this by partnering with acquirers to deploy their machines and then taking a cut each time a card transaction is processed on these machines.While payments can also potentially serve as a lucrative source of revenue, it might also not really be the biggest. Instead, it would likely be how this data that the start ups would be collecting would be monetised.
The bigger picture
Hypermarkets like CarreFour and AlFatah get FMCG products at better prices than a small retailer because of the sheer size and the volumes of sales at these big retailers. Because the volumes are big, manufacturers are willing to lower the prices for these retailers, giving them better margins - something unavailable to smaller retailers like neighborhood stores. Collectively, however, the smaller retailers generate more volumes overall for manufactur ers than the big hypermarkets because their overall number is very big, but are not able to negotiate better prices. That is because indi vidually, neighborhood retailers are very small for manufacturers to take them seriously.
valuable for the manufacturers to decide on how much to produce and how much to sell, optimising the supply chain based on produc tion and optimising margins for distributors and retailers, and end prices for consumers.
For now, the indicators are favourable. There is a generational shift at retailers where batons have been passed on to youngsters in the family who are savvy about technology which will lead to better adoption. On the other hand, a lot of dry powder has made it to the retail sector in Pakistan already which is one of the biggest contributors to the GDP. B2B eCommerce startups in grocery retail secured $165.5 million in funding this year alone, the biggest for any sector startups are in. But this digitisation would not happen overnight because it is not about just delivering products to kiryana stores or delivering groceries to consumers. Both startups believe the process would be slow as it would require the retailers to see their sales and profits grow, which will happen over time.
“The retailers we are targeting take about Rs100,000 home in earnings for the month. Such retailers are at a cusp where getting to digitisation is not a complexity for them but they haven’t done it yet for one reason or the other. But if they do, it will help them grow,”
O
STARTUPS
It is going to be an arduous journey, however. As founders of both these startups say, they would have to drive a behavioural change in the retail ecosystem as it currently exists. “Our success depends on how success ful we are in bringing behavioural change and digital adoption in a very traditional retail segment,” says Pasha.
In the process, they will be helping kiry ana store owners from disruption by bigger retailers. “We will reverse the trend of what has happened in the developed markets. by saving local communities and heritage created by the historical presence of kiryana stores, and not have an environment where large super markets killed them,” says Pasha.n
The data collected, and the deep in sights derived from the data in this arrange ment, of course at a bigger scale when the majority of the retail chain is digitised, could be monetised because such information is very
n a broader level, once thousands of such retailers are brought onboard and are using SnappRetail or Alladin’s systems, the data collected will be an aggregate of a big number of stores valuable not only for the distributors, but also the manufacturers who want to keep a track on their brands and their sales.
Rasheed tells Profit that SnappRetail wants to eventually get into this play where they would be furnishing reports to distributors, partnering with them for supply of inventory to these retailers and getting a cut in the process, while also enabling them to optimise their supply chains based on actual sales data, as opposed to the intuitive guesses of a retailer.Theyhave contracts with clients in place already, but did not disclose their names. These reports will give manufacturers valuable insights on their brands and their sales, allowing them to try new strategies based on granular level data. For example, Unilever could monitor the trend of sales of one of its brands in one designated area of Karachi, and compare it with another, through access to the granular level data of each retailer in that locality through SnappRetail or Alladin. Unilever could then decide on marketing strategies or running discounts on the brand for that locality based on these insights.This data further turns both SnappRetail and Alladin into something far bigger. The retail sector is big with the number of grocery retailers estimated to be 800,000 or over that. While the target market of SnappRetail and Alladin are the 200,000-300,000 retailers out of the overall number of retailers, that is still a big number to be able to influence what margins they get from manufacturers.
So if on a platform, thousands of retailers are aggregated, they are collectively generating big enough volumes of sales to be able to negotiate better margins. SnappRetail and Alladin can be those platforms which, once they have onboarded thousands of small retailers, can potentially secure exclusive rates and deals from manufacturers and distributors, for each retailer that uses their systems, if they order through these startups. These startups would have a play in supply chain as well, helping small retailers procure inventory from distributors and manufacturers, and take a cut onWhileit. there are only two startups in this space at present that we know of (there could be others as well operating in stealth mode), the number of retailers presents a big market for others to enter and digitise them.
Adeel Rasheed, co-founder and CEO at SnappRetail
A slide from Airlift’s pitch deck underlines that its dark store model was focused on disruption of neighborhood stores
There has been a silent transition in the inter-city bus business. This is the story of how it happened.
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he first thing that hits you is the noise. It grows steadily as one approaches the Abdullah Travels terminal in the middle of Lahore’s Bund Road. But the closer you go the clearer it gets until, finally, the bustling of people, the roaring of engines, and the screaming of both bus conductors and children reaches crescendo.
By Daniyal Ahmad
Yet the star of the show at the terminal is undisputed — Faisal Movers. Founded in 2001, the company has since grown to become one of if not the largest providers of inter-city bus travel in Pakistan. In the two decades since they entered the business, they claim to have grown the biggest fleet in Pakistan, beating back Daewoo, and diversifying their business.
Today, Daewoo has a fleet of 350+ intercity buses and operates government contracted intra-city routes in Lahore and Multan with a fleet of 250+ buses. In comparison, Faisal Movers has more than 650 buses catering to 55,000-60,000 travellers every day. They have in many ways bossed Daewoo in the past decade, using cheaper rates with similar services to turn a large number of inter-city travellers from the legacy company to themselves. This
“We were in the transport sector but not in the bus business. We were in the business of long vehicles” said Nauman Hafeez, Group Head Operations at Faisal Movers, to Prof it. “Cargo coming into the country reduced significantly under Pervez Musharraf. We had bank financing available to us and decided to redirect it towards buses because of it.”
The expansion story
For
“Another competitor had a monopoly on the Sargodha-Multan route and gave us a pret ty tough time,” explains Hafeez. “When we found the classic techniques were not working, we decided to test our nonstop service on two stops with a few cars, and they were successful. Customers had embraced the nonstop service and our fare was lower than Daewoo.”
And that became key. In the years to come, Faisal Movers would not shy away from looking to Daewoo for how to operate. Daewoo was, compared to the rest of the inter-city bus industry, a fine-tuned machine. Faisal Movers simply had to wait and observe. They operated on a model of offering the same services at cheaper rates, providing a relatively similar travel experience at a lower cost.
The world of the transport business is cut-throat, to put it politely. It is dirty to put it straight. The people that run it have to be ruthless in their business tactics and guarded in their public personas. Since 1997, the King of Pakistan’s inter-city bus travel has been Daewoo — the originally Korean backed company that first gave an upscale touch to bus travel has been the go to service particularly for the Lahore-Islamabad route. Many challengers came to try and dethrone Daewoo, but most were a flash in the pan.
he first voyage came in 2001. It was a simple affair, with the first coach bus running a typical route up-and-down the Punjab from Sargodha to Multan with Faisalabad and other stops in the middle.
From here on in Faisal Movers continued to grow. They expanded to include the Multan – Faisalabad and Sadiqabad – Multan – Lahore – Rawalpindi route in 2012, the Lahore –Peshawar route in 2014, the Lahore – Sargodha route in 2015, and the Lahore – Faisalabad route in 2016. Within a decade, Faisal Movers had not just flexed their muscles and taken up a lot more space on the roads, but had also made Lahore, which was once the fiefdom of Daewoo, their playground.
“We’ve seen a lot of people try to enter the business, all of them have fizzled out. Some of them would come in very strong and grow their fleet to 80 buses or maybe 90 buses, but none of them ever crossed that,” says Shehryar Chishti, Chairman of Daewoo. “But Faisal Movers were different. They have done a good job and they’ve expanded scale where other people were not able to. Nobody had crossed the 100 bus barrier before them.”
The Lahore-Rawalpindi route had been Daewoo’s baby. There is a lot of travel that takes place between the two cities, and it was made much easier by the construction of the M2. Daewoo dominated the motorway up until this point and in many ways still does. But Faisal Movers foray into this route not only gave Daewoo competition, but also galvanised other smaller companies.
It was a simple gamble. The cargo busi ness had slowed down and this was a similar line of work that the family had experience in managing. Faisal Movers did not ‘burst’ onto the scene. There was no mass marketing campaign, no strategic planning to take out Daewoo from the first day but rather just a single-track focus on the basics. And, as was expected, this initial foray was not the runaway success one might imagine.
On the right day, you could romanticise the dusty realities of inter-city bus transport. On most, however, it seems an unglamourous affair. Since as far back as this industry has existed, the Abdullah Travels terminal has been the hub where all small-time bus companies have operated from. From Kohistan Express to Skyways and Hazara Movers, under the shade of the shoddy structure that stands at the terminal one can find any number of bus companies providing different rates and levels of comfort and service.
is the story of how Faisal Movers managed to break into and conquer one of the toughest businesses in the country.
At the time the inter-city bus business was still evolving and this was an era of hyper-specialisation. On the one hand, Daewoo had spent four years and a good amount of money, invest ment, and Korean buses into becoming the go to travel option for the urban intelligentia. On the other hand, smaller bus companies fought for scraps amongst themselves.
the first three years of its existence, Faisal Movers sort of trudged along with the rest of the smaller bus companies scrapping for crumbs of the pie. So what did they do? In 2004, the company changed its approach. They actually looked towards the then industry leader Daewoo for inspiration and took a page from their playbook.
In the meantime, Faisal Movers preyed on some of the smaller companies trying to make it. You see from 2011 onwards, there
COVER STORY
Run by five brothers, one of whom is the titular Faisal, the Faisal group has been in the transport business since before 2001. The only difference was that before they started transporting people they were in the trade of transporting cargo.
Incumbents in the bussing industry operated, and still do, on either super stop or nonstop services. The former is by far the more cost effective measure, and the one that was more prevalent when Faisal Movers set up shop. The latter was utilised exclusively by Daewoo at the time. Faisal Movers, having found limited success with their super-stop service, replicated Daewoo’s nonstop bus ser vice three years into their operations.
The company went on to increase their routes. In 2008, barely four years after their ini tial conquering of the Sargodha-Multan route, they managed to break into the Multan-Oka ra-Lahore route separately. This was alarming to Daewoo, which had made Lahore its centre of operations having an expensive headquarter and bus terminal at the provincial capital’s famous Kalma Chowk, as well as right on the edge of the motorway at Thokar Niaz Baig. But Faisal Movers kept moving, and in a very patterned timeline within three more years broke into the Lahore-Rawalpindi route in 2011.
Humble beginnings
The transport business is literally as well as figuratively very territorial. And the Sargodha-Multan route was perhaps one of the most competitive and lucrative routes in the region. What compelled Faisal Movers to enter the competition was pragmatism. You see, this was not a new company being formed with the express purpose of entering a market that didn’t already have enough players. It was a question of survival.
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A
But that is where Faisal swooped in and expanded. They went on to buy many of its competitors as well. They acquired Shuja Royal Express in 2019, Ali Express in 2020, and Bilal Travels in 2022. The companies were rebranded as Sania Express, Silk Line, and FMBT respectively. Not only did Faisal wipe away the names of these old companies, instead of
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‘FAISAL MOVERS.’ Yet aside from the sign, there is very little marking the terminal as belonging to Faisal Movers. Buses of all colours and brands have a pretty equitable share of the place, and different rate lists — some printed, some written by hand — point out different bus services and the routes they are travelling. For the less-discerning eye, Faisal Movers seems to be just one of the many companies hustling for space at one of Lahore’s oldest and most important bus terminals.
In a manner, Daewoo actually sub sidised Faisal Movers’ success. However, there’s more to the story than perfectly exe cuted mimicry. There were also a lot of savvy moves. Perhaps the biggest stroke of genius in terms of going toe-to-toe with Daewoo was Faisal Movers’ terminal economics. Daewoo had long included nice terminals as part of the package they offered. They chose prime real estate, only their buses operated out of these terminals, and they made air-con ditioned lounges with comfortable seating
t the Lahore terminal where we started our story, the buses stand under a gaudy, massive sign that one might expect to find at a Vegas wedding chapel. On one end it reads ‘ABDULLAH TRAVELS’ and on the other
including them all under the ‘Faisal’ fleet they decided to run them as separate companies becoming a conglomerate in the process. More importantly than that, they now have four different ‘brands’ that compete with each other on rates. And if your companies are competing with each other, that means you are holding all the cards and new entrants are going to have a harder time breaking into the business than ever before.
Even for those that know Sania Express, the Silk Line, and the FMBT are owned by Faisal Movers would still see a lot of other companies nesting at the terminal. Names like Roohi, Kohistan and Hazara are all there operating on very specific routes at times. Their presence is very much by design, and a critical ingredient to the success of Faisal Movers.You
was a definite sense of there being too many options available almost at bus terminals in Lahore. At the Abdullah Travels terminal on Bund Road where our story begins, a litany of options presented themselves. Watching the rise of Faisal Movers, other smaller companies figured they would do the same and try to beat Faisal Movers at their own game (while Faisal Movers’ game was, funnily enough, to try and beat Daewoo at their own game).
see, the answer to the question of how Faisal Movers did it is quite simple. Daewoo did nothing and Faisal Movers operated on frugally and persistently. In more detailed terms, Faisal Movers adopted the nonstop service model for the low-cost segment and not just broke away some of Daewoo’s clientele but captured an entirely new base of customers. This was pivotal.
The model was synonymous with Dae woo. Daewoo’s continued successes increased the model’s appeal with only one caveat; the price Daewoo charged. “There was a vacuum. Daewoo was operating at its limit. People had nothing similar to travel in the affordable segments. We filled that vacuum by reducing our prices,” says Hafeez.
When we were building up, we hit our capacity. Obviously everyone has a limited capacity. You can’t reach all places. Joint ventures allowed us to avoid chaos and work with other companies
Terminal wellness
Khawaja Daniyal Shahzad, Director at Faisal Movers
there so that they could handle that end and we would handle this end,” said Shahzad.
This
model enables Faisal Movers to reduce their overheads, benefit from their partners’ advertising, fixate themselves on growth, and ultimately increase their passenger volume. It’s pretty likely that a passenger on-board their partners’ vehicle may just sample them directly for another prospective journey. If nothing else, it provides Faisal Movers with a list of possible candidates to add to their acquisitions.
and little shops. Faisal Movers, since they were providing the budget option, decided that people would wait a few minutes or go through the hassle of going to a place like Bund road rather than paying a premium and avoidingTheyit. decided to buy their own terminals eventually, and they also own the one on Bund road, but continued to operate them on a sharing basis. And there is a reason why they’re sharing the terminal to begin with. “When we were building up, we hit our capacity. Obviously everyone has a limited capacity. You can’t reach all places. Joint ventures allowed us to avoid chaos and work with other companies.” said Khawaja Daniyal Shahzad, a Director at Faisal Movers, to Profit.
Now Profit speculates that these have, and continue, to play a big part in Faisal Movers’ success. We speculate because Faisal Movers was not the most open about this. Many of the partners Profit identified were down to just spotting them at the Terminal and asking Faisal Movers about them. There may be more but that would necessitate bird watching for a while. Profit is not sure why Faisal Movers does not boast about this model because, franky, it’s brilliant.
“These are transport ideas. They are at tributable to those people that work at general bus stands.” said Hafeez when asked for how Faisal Movers was able to come up with these ideas. Now this might sound rudimentary to many reading this. It is most definitely for many of the people headed to Bund Road to catch a bus. However, the thing is that this practice is a staple of just the affordable seg ment. Anyone looking to brand themselves as upmarket could not leverage them.
COVER STORY
So Faisal Movers has two kinds of agreements with other companies, joint ven tures and bus stand arrangements. Let’s start with the former. “For example, we couldn’t reach Karachi, so we only entered a joint venture (with Sadiqabad Transport Company)
Why the business model works
Daewoo had to deviate from this and create their own separate terminals because they targeted middle and upper-middle income passengers. Daewoo did find their success in that model but that also means that Daewoo likely has higher operating costs than Faisal Movers.
So Profit did the maths to present a clearer picture of what’s going in. Faisal Mov ers head office at Bund Road and Daewoo’s head office at Kalma Chowk also serve as bus terminals. Talk about utilising every last bit of
“Competition is not all negative, right? Because what happens is that you go from a 100% market share of a small segment to a smaller market share, but you’re still number one in a much larger segment. Our market share has gone down but we’re still number one, and volume is still much bigger than it was 15 years ago because the market has grown”
Shehryar Chishti, Chairman of Daewoo
“Then there is the other end of this. We have a terminal here, we did not have one in Faisalabad. We had entered an arrangement where we would half of our and half of their buses. We would use their terminal in Fais alabad and they would use our terminal in Lahore.” said Shahzad. Within this terminal sharing arrangement, quite a few companies just operate out of Faisal Movers’ terminal by paying a fee.
This final trait also ensures that they operate as close to full capacity as possible to get as close as possible to the numbers Profit crunched. And well, let’s just say Bund Road has a lot of people. A lot.
his much should at least be conceded to Daewoo — despite the stiff com petition they have held their own. It is easy to be King with no enemies.
heoretically, Daewoo would have Faisal Movers beat. But that’s probably Faisal Movers’ exact advantage. Daewoo has to incur the entire cost of wherever it operates. Now Profit is cognizant of the fact that Daewoo has more than one terminal in Lahore, but Profit is also cognizant of how Daewoo needs to build on prime prop erty to maintain its brand value and attract its target market. All of which increases its costs even moreHowso.much more so? Well, they refuse to tell us but let’s just say it’s probably more expensive to operate in DHA Phase 5 than Bund Road. All of this information is, of course, very Lahore centric — but that is also the city that both of these behemoths have made their addas.{Editor’s
note: The urdu word ‘adda’ has been added here with an express purpose. In the transport business, particularly the routes stretching through Punjab, transporters are famously territorial. A breach of a person’s adda is considered a personal affront at times. In a more lawless time, blood has been shed over less and the stories of Tippu Truckanwala and Goggi Butt are still whispered off at tan-
‘Adda’ politics
So what does Faisal Movers’ do with all their cost savings? Other than expand to have 600+ buses and a list of partners they don’t actively advertise? Well for starters, they offer a pretty good deal for customers to be honest.
TEXTILES16
Faisal’s future
To wrap it up, you’re getting a more affordable trip with more space, and no actual need to make a booking in advance. Should competitors be worried? Yes. Is the industry’s other big player worried? Somewhat but it’s complicated.
Faisal Movers breaks from an industry norm and actually reduces the seating capacity of its buses, so as to increase the space available to customers. Whereas Daewoo’s buses seat 45 and 36 passengers on their Luxury and Gold offerings, Faisal Movers accommodates 36 and 30 passengers respectively on their aforementioned offerings.
This particular feature is also by design.“Our telephonic bookings are low compared to other companies. We rely on walk-in passengers. We gained our customers’ trust by ensuring that we could accommodate them whenever they came.” said Hafeez. The catch is Faisal Movers promises to put you on a bus, a bus they own, but does it matter if you happen to go on one of their sister companies to the same destination?
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The wild cardPakistan railways
There was a vacuum. Daewoo was operating at its limit. People had nothing similar to travel in the affordable segments. We filled that vacuum by reducing our prices
Based on our findings, if both termi nals operated at full capacity, then Daewoo resoundingly beats Faisal Movers both alone and alongside Faisal Movers sister companies. However, the difference between both stands amounts to Rs 171,430 per day.
doors and barber shops in Lahore. The world of inter-city bus travel is more sophisticated (which isn’t saying much) but at the end of the day some of this is a fight over who will get to call Lahore their ‘adda.’}
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looked at all the available time slots and found that the average wait time between Fasail Movers’ buses departing was 1 hour and 1 minute. In comparison Daewoo had an average wait time of 47 times but in accordance with the theme of this article, the situation changes when you incorporate Faisal Movers’ other companies. Accounting for both Sania Express and FMBT, the wait times between departures falls to 27 minutes.
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his is the segue to the question we just asked but it’s also necessary that we end with our main theme. So we’ve covered Faisal Movers’ past, and their present. Logically, the question then is what is the company going to do going forward?Based on Profit’s conversation with them, they’ll just continue expanding. The aforementioned Sania Express, Silkline, and FMBT are all part of Faisal Movers’ corporate strategy to increase their synergies even further. Faisal seeks to differentiate Silkline, FMBT, Saania Express, and Faisal Movers based on price. In that particular order from low to high end so as to capture as much of the market as possible. In accordance with this price discrimenation, they are plan ning to launch an entirely new category in their bus offerings to take Daewoo by the horns.For all its hype, Faisal Movers may still not have had their place in the sun as there’s likely more growth on the horizon. Whenever they do have it, Daewoo will likely benefit from it as much as customers will.
Nauman Hafeez, Group Head Operations at Faisal Movers
Looking at the same Lahore to Rawalpindi/Islamabad route.Faisal Movers charges Rs 2,150 for its Business Class ticket and Rs 1,650 for its Executive Plus ticket, whereas Daewoo charges Rs 2,190 and Rs 2,730 for its compa rable offering. That’s a 30% saving right there, and this is before you realise that your ride is a bit more spacious as well.
space. Profit looked at the number of outbound bus journeys from Lahore to Rawalpindi/ Islamabad (Main) to see which of the two generates more revenue per day. A classic and very populous route in our opinion.
In doing the maths, we utilised the proprietary online booking system for both. Daewoo’s website and Bookkaru for Faisal Motors. We looked at all the trips one may find over the course of any day in the week. In terms of the prices we used the advertised prices, the base prices in particular. We opted to not use discounted prices wherever found for greater accuracy. Seats per bus were the ones that were listed on the respective system for each listed ticket.
Finally, there’s also low wait times between buses which translates to additional ease of hopping onto another bus in case you miss your original one or have a change of plans.Profit
that are operated directly by the government through district administration in accordance with Provincial Motor Vehicle Ordinance (1965) and Motor Vehicle Rules, 1969. They exist to serve all buses that seek to use them. Neither Faisal Movers nor Daewoo can viably use these because of their dilapidated states. However, that is not to say that they would completely be averse to using them.
You would imagine that intercity bus companies would have a plan for long term sustenance amidst these seismic changes, right? Surprisingly, not really.
“I think first, the government needs to recognise that transport is an actual industry, and treat it as such from an access to financing, proper regulation, nationwide regulatory structure. It’s still being operated at a local level and provincial level. Maybe the industry needs to be more active to press for its issues” said Chishti when asked by Profit about the bus industry’s relationship with the State.
Chishti’s final words may allude to why Daewoo is not at a complete loss because of Faisal Movers’ success. Two large formal business entities rather than the wild west of an industry makes exerting pressure on the Government for pressing issues easier. It’s like adding pressure on one particular point rather than slightly stinging someone all over.
“If you have the emergence of a couple of strong players who are big enough then you can ask for a more well regulated, more transparently regulated business” said Chishti when probed about the prospect of having larger formal players in the sector.
of transportation for passengers and freight globally. Successive federal governments have understood this. They just have not taken the requisite measures to improve the railway, until recently that is.
COVER STORY
Conclusion
As part of the China-Pakistan Economic Corridor (CPEC), Main Line 1 (ML-1) is set to be upgraded. When will the improvements come through? Well, as early as this December. ML-1 caters to 70% of Pakistan’s rail needs so the upgradation alone should cause significant numbers of passengers and amounts of cargo to switch to cargo. However, as part of CPEC, more rail projects are still in the pipeline.
The
There are currently eleven fully operational Motorways in Pakistan. Four more are currently under construction or planned as future projects. Then, there is one that is partially operational whilst being under con struction. “With Hyderabad-Sukkur motorway being complete we’ll have Karachi all the way to Peshawar and Islamabad” said Chishti. With more of the planned motorways coming online, volume on intercity buses will increase. However, Pakistan’s situation is not normal. Railways remain the preferred method
rise of Faisal Movers has been phenomenal and well deserved. It has been a story of quiet pragmatism, savvy business moves, and a case of really understanding the true business fundamentals behind the industry. In response, Daewoo has been a gracious competitor and has welcomed the challenge, perhaps because in the long-run they may benefit from it.
All of that said, this is a business that has been built because of the decay of the railway system. If that were to ever factor in again, all of these companies would be under existen tial threat — a fact they are acutely aware of. Whether that eventuality ever happens or not is to be seen for another day. For now, they will slug it out amongst themselves. n
We mentioned earlier that Daewoo did not do anything in response to the rapid expansion of Faisal Movers. That is not entirely true. While they did not make any major swings against Faisal, they did maintain their quality of service and focused on their own fundamen tals rather than sweating the competition too much. That is why, perhaps, the execs at Daewoo don’t seem to particularly mind having a competitor.“Competition is not all negative, right? Because what happens is that you go from a 100% market share of a small segment to a smaller market share, but you’re still number one in a much larger segment.” said Chishti. “Our market share has gone down but we’re still number one, and volume is still much big ger than it was 15 years ago because the market has grown,” he continued. “Having a good number two, number three player is not a bad thing rather than just being a solo and then 20 very smallThatcompanies.”isasurprisingly mature response, but is it perhaps a little too measured? Should Daewoo actually be quite concerned rather than this calm? This is where we enter the realm of possibility. The thing is you could take either a Faisal Movers or Daewoo bus to Islam abad/Rawalpindi and take the one you did not on your return journey. At the end of the day, Faisal Movers and Daewoo will probably eat up many more smaller competitors before they take a chunk out of the other. However, what if there was someone who could, rather than a chunk, just bite an arm off entirely?
Is there anything else that might be on the agenda for intercity bus companies other than a possible revival of the Pakistan Railways? The usual really, fuel costs, possible tariff breaks on bus imports, taxation etc. There is one that does stand out. At least for Faisal GeneralMovers.bus stands. These are bus stands
General bus stands are on average larger than their private stand counterparts. They are also on-average in far more populous areas. This point alone makes it suitable to Faisal Movers’ model if not Daewoo’s. However, the problem with this is that, again, they are for all bus companies to use them and are operated by the Government. Any incentives provided at the Stand would be for all companies there, and there exists no way for them to be made non-excludable.Legislation aimed at allowing exclusive use of just some parts of these stands, if not the outright sale of them, or legislation to improve their management to levels comparable to private stands would be beneficial to our aforementioned protagonists. The government would indeed have to take note if the Stands they have for multiple companies are just being used by two, right?
That someone would be the Pakistan Railways.“Ithink Pakistan has an overall very good motorway network. Certainly much better depth, breath, and quality of road in frastructure than frankly even India and other countries with similar per capita income.” said Chishti.Pakistan has indeed made leaps in terms of our road infrastructure. The very first mo torway, the M2, was made in 1997. 1997 is also serendipitously the year Daewoo began its op erations. Makes you wonder. The intercity bus business in Pakistan, however, is largely what it is because of the difference in the quality between our motorways and our rail network.
Similarly, providing a benchmark tariff, and indexing the same to 70% movement in PKR-USD parity also does not make sense. In the case of solar, the radiation of the sun is being uti lized, which is certainly not linked to any movement in PKRUSD parity. Similarly, there exists no reason why there needs to be a benchmark tariff when a market competitive tariff can be used for the selection of projects. By creating a benchmark, and indexing it to PKR-USD parity, we are essentially creating a market floor, incentivizing the producer, while passing on the welfare loss to the consumer.
he reduction in capital costs associated with solar energy and consequent drop in genera tion cost on a per kilowatt-hour (kWh) basis has primarily been driven by improvements in technology, and production scale. In effect, gen eration cost is only one-fifth of what it was six years back resulting in market-driven adoption of solar panels across the board. It also enabled electrification of off-grid areas or areas with intermittent electricity supply. The adoption of solar, primarily rooftop, decentralized, and off-grid has largely been driven by market forces rather than any government intervention. If anything, the imposition of arbitrary taxes, considerable delays in net metering which needs to be facilitat ed by distribution companies, and the absence of any cohesive solar strategy have largely acted as a deterrent. The absence of government has fared better for solar in the country, than its presence.Recently, the government has announced a plan to roll out 10,000 MW of solar generation capacity across the coun try, split between installation near [high-load feeders], in government offices, etc. A novel plan, which should certainly be catalyzed given the country’s dependence on imported sources of energy, which have been deemed unaffordable in the current scenario. To reduce electricity costs for consumers, it is imperative that necessary steps are taken, and the rollout of 10,000 MW of solar is one such step. However, this will add to already excess capacity in the country. The problem isn’t capacity, but the availability of affordable sources of energy (i.e.
Indexing the sun
Land is a major cost in any utility scale solar project. The government providing land in strategic locations is an incen tive which can catalyze rapid installation and off-take, and is appreciated. Availability of land at zero upfront cost would further reduce project cost, and consequently reduce electricity generation cost. Similarly, the only thing that the government should guarantee is connectivity to the grid, as infrastructure for the same is still completely controlled by the government. Everything else should be left to market forces,such that the best possible price can be discovered for the consumer. Absence of a price discovery process and plethora of incentive which institute a price floor can potentially lead to wel fare loss for consumers, and can defeat the primary objective of the initiative, which is to generate clean affordable electricity via solar.
Ammar H. Khan
18 COMMENT
Indexing the tariff to PKR-USD parity also creates a misalignment, wherein the incentive to improve efficiencies to reduce costs and remain competitive would be eliminated, as an index to PKR-USD parity would virtually guarantee escalation in tariff and distort the market. The consumer continues to pay a heavy price for such indexing for power projects across the spectrum, continuing the same would be further eroding any long-term cost benefits that can be accrued from solar energy.
The problem is with the incentive structure that is being offered. Given the benefits of scale and technology, generation through solar is now lower than other fossil fuels. In such a scenario, there exists no rationale for the government to guar antee the purchase of power, which eventually translates into capacity payments. Solar generation by virtue of its market competitive generation cost would remain one of the cheaper sources, and hence be at the top of the electricity dispatch merit order. If the market and technology are already solving a problem, there exists no reason why any kind of demand guar antees are made available, considering how capacity payments continue to weigh heavily on our energy bills.
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OPINION
fuel, whether that is coal or imported gas).
The writer is an macroeconomistindependent and energy analyst.
We’ve already covered why Riaz wanted to own a bank in the first place and how this would integrate with his other line of work, real estate. However, it looks like Riaz’s stint as a banker is not over, that too, is not by choice. Bahria Town Private Limited still owns 119,279,077 shares out of the total of 135,600,000 shares in ESBL. This makes up 87.9639% of the company. Riaz has been on the lookout for a buyer for the bank, however, things have not been smooth sailing.
So you want to buy a bank. You start doing the obvious. You look at the options in front of you of any banks that may be looking for buyers, you consider how much money you have, consult the lawyers, and then move on to the important stage — Fewnegotiations.peoplegetto be in a position in their life where they are undertaking the process of buying a financial institution. Yet the steps are pretty simple, even if the backroom conversations that fill in the gaps between all those steps are quite… colourful to put it mildly. But if you are buying a bank in Pakistan, perhaps the one person you wouldn’t expect to buy it from is Malik Riaz.
Whether Riaz is selling this bank to
Is it really that difficult to sell a bank?
Escorts Investment Bank has been up for sale for a while
20
Malik Riaz is still a banker but not by choice
Yes the property mogul in addition to being one of the wealthiest and most power ful men in Pakistan is also a banker. Well, not a banker strictly speaking, but a bank owner. And right now he very much wants to shed the cap and continue on his merry way encrsorry we mean developing land and staying in the real estate business.
he was able to buy was Escorts Investment Bank (ESBL).Thestory isn’t a new one. In August 2021, Profit wrote a story called, “Obituary: Malik Riaz the banker” highlighting Riaz’s struggles at owning a bank and settling with an investment bank, saving , trying to create a mortgage market, and finally when none of that worked – calling it quits and selling the bank.
et’s relate this to something more up Riaz’s alley – real estate.
will look up the ad you post online. Some of them will call and actually come to your open house or set up an appointment. They may like the house based on the superficial look that they have; some may choose not to buy the house. The ones that like the house, will want to have a more detailed look into everything and will ask you for some time to make a decision and access the house to look it through. Here they’ll check how sturdy it is, the material, the potential for the future, whether it’s the right fit, and so on. They may also have it checked in the local registry to see if it’s disputed. Sometimes a preliminary offer is put in before this stage and revised once all this is over. Now that an offer is put in, the ball is in your court to decide whether you like it and want to sell, or choose not to.
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Say you’re selling your house. There will be countless people that
To be fair, Riaz only really bought the bank to help along the way in his real estate endeavours. Essentially, he wanted to buy the bank so he could have an easy source for mortgages for his many housing projects. It didn’t quite work out because the only bank
In the case of a listed company, every time someone shows interest in buying or acquiring a significant stake, a Public Announcement of Intention (PAI) is sent to the company by the acquirers themselves or their managers. The company then sends this letter to the exchange as information. They are required to do so by law. After that, the acquirers conduct their due diligence and have to make a decision before the time elapses, basically six months.
n August 31, 2021, M. Munir M. Ahmed Khanani Securities wrote to ESBL as the managers of Syed Sabur Rehman, of the Progressive Group and J.R Dallas Wealth Manage ment. Sabur Rehman and J.R Dallas Wealth Management had both come together and expected to buy more than 50% of the issued and paid-up capital of the company. They hadn’t made a public offer and stated that that would be determined after the finalisa tion of the agreement. The share price quoted on the exchange one day before the PAI was Rs11.51 per share.
For context, Rehman is the Chairman of the Progressive Group. The group is principally involved in various companies in the group which are involved in the financial sector such as leasing, insurance, textile, airline, import & export, construction, agri culture trading, restaurants, and food export acquisition.J.R.Dallas Wealth Management is based in Dallas, USA. It is in the business of consultancy to execute investment strategy and hold multiple companies under its portfolio. The CEO of the company is Jehangir A. Raja who is an entrepreneur, Wall Street vet eran, and an accomplished financial executive.
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No other news came from this deal for quite some time. However, there was still some time for something to come out of the deal. In the midst of all this on February 2, 2022, CEO Naveed Amin resigned once again. The last time Amin resigned in 2021, he was made to stay again following negotiation. This time, however, it was his final goodbye.
Bahria Town Pakistan Limited acquired ESBL, the bank defaulted on its obligations worth Rs566 million. Rs492.113 million of this was Certifi cate of deposit holders. The investment bank had also been non-compliant with the minimum equity requirement for seven years.
Riaz added, “In this regard, in addition to the Purchasers not diligently pursuing and completing the Conditions Precedent, the Long Stop date has also passed.” However, on May 27, Riaz once again wrote to Akhtar, this time in a different way – maybe Riaz was just done with the bank.
It added, “The initiatives to encourage housing projects in Pakistan and adoption of various policies to provide stimulus for growth of this sector would prove to be an essential determinant to flourish the housing finance sector as well. It is expected that House finance and Microfinance would play its pivotal role in coming times subject to the positive conclusion of thisRevenuepandemic.”for the bank has improved following the acquisition, which however, could not turn things around for the bank. “This is primarily due to an increase in finance portfolio and mark-up income on investments. However, during COVID-19, the Government significantly reduced interest rates which could not be capitalised during the second half of FY 2021,” explained the accounts.
Attempt 2: Mian Javed Akhtar, Mohammad Ali Kazmi, and Mian Zeeshan Javaid
Akhar and Javaid are in the business of trading, construction, agriculture, and the im port & export business. Akhtar also owns more than 50% shares in Upright Engineers Pvt Ltd, a multi-purpose business.
There have been two attempts at ac quiring ESBL within the past year.
On August 16, 2022, Zainab Malik resigned from the position of Chairman and Director of ESBL. On September 9, 2022, AKD Securities wrote to ESBL and withdrew the PAI. The PAI was set to expire on September 10, 2022, anyway. On September 13, 2022, Syed Tahir Nawazish stepped in as chairman of the
Is ESBL a good bet?
Before
“This is to clarify and confirm, based on our discussions, that notwithstanding the termination of said agreement, BTPL is still desirous to sell its shares of the Bank to Mr Akhar, Mr Javaid, and Mr Kazmi, subject to the parties mutu ally agreeing on the terms of the said transaction. Accordingly for the said purpose, the parties are in the process of carrying out fresh negotiations for the sale and purchase of the shares of the Bank,” wrote Riaz.
Kazmi, however, has worked in the finan cial sector and his expertise comprises commercial banking, insurance, treasury, trade finance, leasing, and investment banking.
The letter pointed out that the “purchasers were required to fulfil certain conditions precedent, completion of which would lead towards Closing. However, since the Execution Date, the Purchasers have not made any progress to seek the required regulatory approvals and fulfil the conditions precedent.”
ESBL not only provides housing finance but also microfinance among other offerings. Keeping all this in mind, it could be a good bet. Maybe someday we might see a startup putting up an acquisition offer too. However, until then, ESBL is still on the market for sale. The seller is hoping the deal goes through. n
On May 1, 2022, Riaz on behalf of Bahria town, wrote a letter to Akhtar terminating the shares sales and purchase agreement dated March 31, 2022.
The
“In 2021, markup expense had decreased significantly due to issuance of right issue in previous year and repayment to outgoing group sponsors loan during the period. Hence, the company reports no markup expense as compared to Rs16.77 million of corresponding previousTheyear.”loss per share worsened in 2021 going down to Rs0.6 per share compared to Rs0.2 in 2020; similarly, the loss before tax ratio went up to 68.93% compared to 19.14% in 2020. The advances to deposits in terms of time increased to 6.56 times in 2021 compared to 4.71 times in 2020.
On March 22, 2022, ESBL changed its company secretary once again. The last change was on December 2, 2021.
However, on October 28, 2021, J. R. Dallas Wealth Management backed out. This meant that Rehman was now the only one interested in acquiring more than 50% shares and control of ESBL.
On February 14, 2022, Riaz wrote to Rehman terminating the Shares Sale and Pur chase Agreement that was dated September 9, 2021. Following this notice, on February 21, 2022, the PAI was withdrawn by Rehman. It was to expire either way on February 28, 2022.
Attempt 1: Sabur Rehman Progressiveof Group and J. R Dallas Wealth Management
Bahria Town then injected Rs1.2 billion into the bank, paid off outstanding depositors and the markup accrued worth Rs531 million, and also compiled with the minimum equity requirement.“Thecompany is currently focused on the existing business model along with the transformation of the business models into Shari ah-compliant products. This would enhance the market penetration capacity of your Company. It is also expected that a major part of digiti zation would complete in the coming year and would also contribute towards achieving better economies,” read the Annual Report 2021.
go back to a private life away from PSX no tices and disclosures, or the banking life just isn’t for him has not been ascertained.
board replacing Zainab Malik.
next serious client walked in on March 11, 2022. AKD Securities wrote to ESBL on behalf of Mian Javed Akhtar Mohammad Ali Kazmi, and Mian Zeeshan Javaid. The trio had planned to acquire more than 50% of the issued and paid-up capital of the company. They too had decided to determine the public offer after the finalisation of the agreement. The share price quoted on the exchange one day before the PAI was Rs7 per share.
BANKING
This deal was now completely dead.
sion in the already yawning opportunity gap.
s floodwaters recede, the devastation caused by the floods across Pakistan, particularly in Sindh and Ba lochistan, is becoming more and more evident. The government is estimating the costs at around $30 billion at this time, while an ongoing analysis being conducted by this author and Ammar Khan places the financial losses and reconstruction costs between $20-25 billion.
Dealing with the human and emotional challenges exacerbated by the floods will require both investment in rebuilding what has been destroyed and investing in programmes that prevent these households from falling further behind. The priority should be on ensuring that what little these households owned is fully replaced, and on providing basic education to not only children, but women who have been affected by the floods. Doing so will not only ensure that the wealth gap does not widen further, but that women are provided with the education and tools to improve not only their own lives but the lives of their children, leading them to have access to better opportunities.
In addition, efforts need to be made to provide mental health services to those displaced, such that these households – children in particular – can better deal with the trauma caused by these floods. Research increasingly shows that natural disasters lead to generational trauma, which inhibits the success and development of future gen erations. Given that these citizens have been devastated not once but twice in just 12 years, it is important for the state to mobilise resources to mitigate against the risk of generational trauma creating a vicious cycle that feeds on itself.
Many of the regions devastated by this unfolding catastrophe are some of the most underdeveloped parts of Pakistan. These regions were also devastated in the 2010 floods, meaning that they were only just beginning to recover from the last disaster.
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To recover from the floods, the right investments must be made Uzair Younus
While the exercise of counting the economic losses and reconstruction costs is a useful and important exercise – one cannot mobilize domestic and foreign resources without such analysis – it is simply not enough. For without assessing, accounting for, and making efforts to deal with the emotional trauma caused by this devastation, Pakistani society will be unable to recover from this tragedy.
Making these investments is going to be difficult at best, not only because of the lack of capacity in rural parts of the country, but also because of the resource constraints that Pakistan faces. This is where a conversation about restructuring the very core of Pakistan’s economy, which currently works for a select few at the expense of the many, is sorely needed.
While Pakistan’s elites try to vociferously argue for reparations from the rest of the world – a com pletely valid argument – the fact is that their claims are likely to be ignored. This is not only because of the apathy of global elites, but also because Pakistan’s elites themselves have not done enough to show that they will utilise resources for those on the periphery. Take for example the PPP, which claims to be the flag-bearer of progressivism in Pakistan, and has been ruling Sindh for years. Its leaders have failed to break the power of landed feudals in Sindh, perpetuating an extractive and inhuman system in rural parts of the province.So long as domestic elites fail in their own moral duty towards their citizens, global elites will re main unconvinced of their own moral responsibility to assist Pakistani citizens devastated by these floods.
Almost 69% of households in rural Sindh belong to the lowest wealth quintile, compared to almost 30% of households nationally, according to the Pakistan Demographic and Health Survey (PDHS) 2017-18. The devastation caused by the floods will only exacerbate the wealth gap between these households and the rest of Pakistan.
As argued in previous columns, Pakistan is a kleptocracy where over $17 billion a year are diverted to elite segments of society. This structure, where there is socialism for the privileged and nothing for the downtrodden, needs to be destroyed. Reform, however, requires elites that have captured power and wealth to proactively and willingly give up some of their own wealth for the benefit of the many.
The humanitarian crisis will also widen the education gap between the rural parts of Sindh, Balochistan, and the rest of Pakistan: 82% of females in rural Sindh and 89% in rural Balochistan have no education, compared to almost 62% across rural Pakistan. The dislocation caused by the crisis will mean that another generation of women will face high barriers to attaining an education, leading to a further expan-
22 COMMENT
The writer is Director of the Pakistan Initiative at the Atlantic Council, a Washington D.C.-based think tank, and host of the podcast Pakistonomy. He tweets @uzairyounus.
Given the ongoing political polarisation across the country, such a conversation is unlikely. Which means that the most likely scenario is that households devastated across Pakistan, especially in rural Sindh and Balochistan, are going to fall further behind. This is and will be tragic, undermining the overall recovery from these floods, generating further trauma among vulnerable groups, and reinforcing Pakistan’s status as the sick man of South Asia.
OPINION
cost-effective.Panadol is a brand name for the paracetamol drug sold by GlaxoSmithKline Consumer Healthcare Pakistan Limited (GSKCH). While brand name drug refers to the name given by the producing company, generic drug refers to a drug produced after the active ingredient of the brand name drug. Generic drugs will, however, be sold under different brand names, but will contain the same active ingredients as the brand-name drug.
The Pharmaceutical Manufacturing Association of Pakistan (PMA) notes that the Drug Regulatory Authority of Pakistan had sent a summary to the health ministry recom mending a Rs 1 rise in the price of a tablet for all paracetamol. This would bring the price from
Despite Panadol being the brand name for paracetamol, the brand name is often used as a substitute for the generic name; similar to the way people say ‘Surf’ instead of washing powder owing to a strong brand presence.
This time, however, his mother made a curious request: Panadol. Surprised to hear that she could not find something as basic as paracetamol from the local dispensary, that was the first time Ahmed realised that Panadol was short in the market across different cities in Pakistan. In fact, the shortages had hit nearly two months ago and have only worsened over time.
Raids, hoarding and over regulating — You probably need a Panadol to figure out what’s going on.
that mark the shortage of a drug like panadol. While it is not life-saving in most instances, it is a critical over-the-counter option and its unavailability has resulted in speculation that not only have pharmaceutical companies reduced or stopped their production of certain drugs but may also be hoarding stores of these medicines to jack up the prices by force. The latter theory has gained particular favour among some since a DRAP raid that uncovered a large store of panadol at a factory. Of course, to understand what is going on fully we must go back to the root of the problem.
By Ariba Shahid
23PHARMACEUTICALS
Every
These are the sorts of little moments
Origins Glaxo
time Ahmed visits his moth er’s house up north, he makes sure to pack some treats from Islamabad that aren’t easy to find in the isolated area where she lives. On most visits, he packs her bread from her favourite bakery or other snacks and trinkets that are hard to come by in more rural settings. You can find most essential items even in smaller towns and cities, but it is the little luxuries that evade you.
Smith Kline Consumer Health care (GSKCH), which produces around 450 million tablets a month of this over-the-counter (OTC) drug, was assumed to have previously slowed down production citing that it was no longer
To
In response to this, GSKCH wrote to the Pakistan Stock Exchange (PSX) in the form of material information. It confirmed that there indeed was a raid at one of their warehouses. The pharmaceutical company also adds that it rejects claims related to hoarding Panadol intentionally to create shortages.
make matters worse, Early on the morning of Friday 16 September, Drug Inspector Sindh, Dilawar Jiskan raided and recovered 48 million tablets or 241,893 packs of Panadol packed in 4,032 cartons from GSKCH’s warehouse at Hawksbay Road.Jiskani told Dawn, “The seized medicines were being hoarded to sell them at expensive rates in the market,” he alleged, adding that the price of the tablets was estimated to be Rs250 million.Claims
around hoarding were being made regarding the drug owing to the shortage in the local market. Jiskani added that the police have initiated a probe into the incident.
Haroon adds, “This has been shown through our commitment to the people of Pakistan throughout challenging times. We continue to supply Panadol products in the country and have adjusted our production capacity to ensure some product availability, despite market obstacles.”
the market for a few months. We’ve been selling other brands of paracetamol instead. Some cus tomers, however, are adamant on getting just panadol even though it is a brand name for the paracetamol drug,” says a drug store pharmacist in Karachi.“Not only is supply short, but demand is also very high. As a result of floods, there is more demand for panadol in affected areas. People in the city are buying here and sending them off with their relief items. However, Panadol is often prescribed during COVID and dengue to deal with pain and fever. We’re seeing more cases of that.”
powers of a drug inspector relate to monitoring and ensur ing the quality of the drug that is in the market. They do not expand or allow for that drug inspector to as sume quantities or best economies in a market. They are, after all, a far too simple a position
I would suggest the media should criticise the pharmaceutical companies rather than the government as companies have created an artificial shortage. Similarly, some politicians have been marketing a pharmaceutical company and its brand rather than focusing on the issue of flood victims
Abdul Qadir Patel, Federal Minister for National Health Services
The stocks at this warehouse were intended to be released and distributed in the country in the normal course of business. As GlaxoSmithKline Consumer Healthcare Pakistan Limited (member of the Haleon group), we are led by our purpose of delivering everyday health with humanity
Patel’s statements make it confusing - on one hand he’s saying there’s no shortage, on the other hand he’s calling it blackmail and an artificial shortage. “Panadol has been short in
Farhan Muhammad Haroon, CEO of GSKCH
In a rather confusing move, later on, Patel blasted pharmaceutical companies and blamed them for creating an artificial shortage of key medicine. He warned the companies that their “blackmail” tactics would not work.
24 Rs 1.7 to Rs 2.7. The federal cabinet, however, has rejected the summary.
Earlier this week, in a press conference, Federal Minister for National Health Services (NHS) Abdul Qadir Patel claimed the essential medicine was available in abundance and the government did not plan to increase its price. He claimed that the drug was not in short supply anywhere in the country.
It is said that the current cost per tablet is Rs 2.31. It is also important to note that there is a 15% mandatory margin applied to the pricing of medicine. Sources claim the producer only makes Rs 1.35 per tablet owing to distribu tion costs. Production is said to be no longer cost-effective as the prices of raw materials have increased in international markets, whereas the price of the tablets remains low.
A case of hoarding or scapegoating?
“The stocks at this warehouse were intended to be released and distributed in the country in the normal course of business. As GlaxoSmithKline Consumer Healthcare Paki stan Limited (member of the Haleon group), we are led by our purpose of delivering everyday health with humanity,” said Farhan Muhammad Haroon, CEO of GSKCH in a letter to the PSX.
Is this a breach of power?
“The
“I would suggest the media should criti cise the pharmaceutical companies rather than the government as companies have created an artificial shortage. Similarly, some politicians have been marketing a pharmaceutical company and its brand rather than focusing on the issue of flood victims,” Patel added.
“What’s happened here, and its clear from the seizures memo that they’re trying to draw powers from section 18 (1) (i) on the subsection of that act, Drugs Act 1976.” Jaferii adds, “The language of the act clearly empowers the drug inspector, to enter, monitor and inspect, an area where drugs are warehoused, but clearly that right is afforded so they can inspect the quality of warehousing, to check for contamination and safety.”
There should be no surprise that pharmaceutical industries are not charitable organisations, they are hard core profit making machines in a capitalist environment.
The powers of a drug inspector relate to monitoring and ensuring the quality of the drug that is in the market. They do not expand or allow for that drug inspector to assume quantities or best economies in a market. They are after all, a far too simple a position to be some kind of macroeconomic regulator in their personal capacity
He says that the powers do not provide for a raid to determine quantities. “This is clearly an illegal raid that will not stand in court proceedings, regardless of public sentiment around this.”
Abdul Moiz Jaferii, Senior Partner at HWP Law
The extent of price fixing was such that in the past, since 2001 there had been a mora torium on price increase on certain medicines. For years, the pharmaceutical industry couldn’t charge prices that were in line with their costs, the depreciating rupee, fuel prices, inflation, and raw material costs. This went on until 2015 when the first ever comprehensive Drug Pricing Policy was introduced.
This, however, hasn’t made things any better. You see, price changes need to be approved by the government before they’re implemented. And despite these pharmaceuti cal companies out there saving lives, they are also answerable to shareholders not only in Pakistan but around the world.
If we take a look at GSK alone, as of 2021, it had a 27.38% gross profit margin, 8.83% net profit margin, Rs 18.23 earnings per share, and
Profit after tax of Rs 2,134 billion. Making profit is not a crime. Profiteering, however, is. In this situation, GSKCH, however is incurring a loss on the production of paracetamol.
“Moreover, if we talk about logistics of high selling brands, then they do not transport their products partially. So I am sure the lo gistics team wanted to minimise the transport cost and wanted to transport it in one big container. In short, this is usual day to day practice,” adds the source.
PHARMACEUTICALS
It is important to note that any such de cisions regarding stopping a major product line are material information and the listed company is required to report it to the shareholders through the PSX. “I doubt the authenticity that GSK fully halted Panadol production. This cannot be true. You’re keeping a whole machine line idle - which is more alarming for the production planning team,” explains the source.
Another source in the pharmaceutical industry agreed with the sentiment that this was not a case of classic hoarding. “Essentially what is happening is that the production of Panadol was scaled back owing to the costs of producing and selling. Because of this reduced supply, GSK had the upper arm in negotiating with the government over a rise in the price of a paracetamol, especially at a time when the country is battling floods, dengue, and ofcourse COVID-19. However, the raid has placed the ball back in the government’s court, by paint ing GSK as a villain. Both parties were engaged in power moves to get their way,” they said on the condition of anonymity.
As a business it makes sense for it to re allocate its resources towards more profitable business sections. However, the real problem at hand like in most sectors in Pakistan is the over regulation.DrugsinPakistan are regulated under the Drug Act 1976 and DRAP Act 2012. As a result the sales, storage, and distribution of drugs are regulated at provincial level. The manufacturing, licensing, registration, pricing, import, export, and monitoring of controlled drugs, however, is under the powers of the federal government. The DRAP works hands in hand with the federal government to regulate the industry. This also includes fixing the prices of drugs.
What this means is that in such a situation, they may have to cut back on supply, reallocate their resources, and sometimes even halt supply. While this may end up in a shortage in the market; it might also help them make a point to the government and get their demands
stock as hoarding. Which is totally baseless.”
to be some kind of macroeconomic regulator in their personal capacity,” says Abdul Moiz Jaferii Senior Partner HWP Law.
It is a routine practice in the pharma in dustry to maintain 30 day safety stock at own warehouse and 30-45 days stock at distributor level. He adds that these 250,000 packs were an order from a distributor ready for dispatch by the logistics team, however the raid happened before that could happen. “The drug instructor pulled a PR Stunt and portrayed this
He explains that the production of Panadol was rationalised by GSK, and not completely halted due to the high variable cost. However, whatsapp forwards, and news outlets have been carrying news stating the production had stopped.
So why go through with a raid?
rofit reached out to Haroon to enquire details regarding the shortage and the raid. He declined to comment.
P
Profit asked a source in the company whether this was the average stock level maintained. The source confirmed that the average stock level fluctuates from time to time, however, this is normal for the GSKCH storage.A
source working in the pharmaceutical industry, however, explained that this wasn’t even buffer stock. “I don’t think GSK, or Haleon, needs to hoard 250,000 packs, which is less than one month’s safety stock. As per the Supply Chain policy GSK needs to maintain a 30 days safety stock at their warehouse. There were some production constraints for Panadol. As a result, no safety stock was maintained.”
The real problem
However,met. public relations and public perception play a strong role too. When the public starts reacting to pharmaceutical com panies behaving like the capitalists they are - it often ends up negative. n
By Ahasam
WAhmadhenitcomes
finance. Instead, farmers rely on traders and moneylenders to meet their credit needs, often tied to sale of inputs and with repayments tied to future sales of farmers’ produce. Commercial banks are hesitant or unable to provide financial services to less lucrative rural markets.”
“Villages are too small to justify setting up branches, and State Bank of Pakistan (SBP) regulations prohibit banks from doing business outside a 50km radius of a branch. Some banks (e.g. Habib Bank, Al- Baraka, MCB) use vehicles to offer mobile banking services, but their products remain ill-suited to smallholder clientele due to high minimum loan values and stringent collateral requirements. Providers of microfinance services do target rural farmers, but their coverage remains low, due to high transaction costs and limited human resourc es.” The report further added.
Despite recent efforts made by the State Bank along with other, smaller financial institutions, it seems that deeply-rooted social biases may continue to restrict female participation in the financial system
to financial inclusivity, Pakistan ranks close to the lowest rung of the ladder as a majority of its population has no access to formal financial services, savings, credit, insurance or even the knowledge required to be able to make intelli gent pecuniary choices. The country is part of a seven-nation group that is home to more than 50% of the world’s unbanked population. In an agrarian economy, the bulk of the unbanked population is rural farmers.
that microfinance services currently only serve 11.5 percent of a potential market of 27 million
28
As per, “The business case for the finan cial inclusion of rural women” a study by MDF, Kashf Foundation and Khushhali Microfinance Bank (KMBL) in 2020, “Access to finance remains very scarce in rural areas. Smallholder farmers are particularly poorly served: 29 percent are entirely excluded and most of the remainder have only limited access to formal
However, when one disseminates the data, another concerning trend is highlighted; the deplorable state of female financial inclusion in the Accordingcountry.to the study, “It is estimated
Underlying Factors
KMBL, the largest Microfinance Bank in the country, had a closing portfolio of around 72 billion in December 2021 out of which only 22% pertained to female lending. The figure is closer to 20-21% for Mobilink Bank, which claims to be the country’s largest digital bank. As per SBP, the industry average figure is aroundDespite23%.
the fact that the situation in Pa kistan is similar to other medium and low-income countries, it is actually amongst the worst performing when it comes to numbers.
people. Women in Pakistan have even greater barriers in accessing finance. Nationwide only seven percent of women hold a bank account. In 2019, only three percent of SME loans and nineteen percent of microfinance loans were distributed to women.”
a majority of those who are still unbanked are women. Things are not much different in economies in which less than half the popula tion is banked. For example, in Egypt, Guinea, and Pakistan women make up more than half of the unbanked population,” says a Findex ReportAgainst2021. this backdrop, the continued growth of the gender gap in Pakistan makes the situation unbearably hopeless. Yet another area that highlights this is that of mobile money. As per a GSMA report, State of the Industry Report on Mobile Money 2022, “In Pakistan for instance, 76 percent of men and 51 percent of women own a mobile phone, 77 percent of men and 70 percent of women have heard of at least one national brand of mobile money, but only 19 percent of men and six per cent of women have a mobile money account.”
“The majority of unbanked adults continue to be women even in economies that have successfully increased account ownership and have a small share of unbanked adults. In Türkiye, for example, about a quarter of adults are unbanked, and yet 71 percent of those unbanked adults are women. Brazil, China, Kenya, Russia, and Thailand also have relative ly high rates of account ownership, compared with their developing economy peers, and yet
“In the case of productive lending, lack of documents and awareness is the primary impediment. On the digital front, we experienced that women could not open accounts as the vetting process failed because they were using SIMs that were not registered in their own name
But perhaps, the most determining role in sustaining
The figures are representative of the overall gender disparity in Pakistan. As per the Global Gender Gap Report 2021 by the World Economic Forum, Pakistan ranks 153 out of 156 countries when benchmarked against the criteria of Economic Participation and Oppor tunity, Educational Attainment, Health and Survival, and Political Empowerment.
FINANCIAL INCLUSION
These
figures routinely make one won der about what lies behind the lack of inclusivity in finance for women. And the list of reasons is as long as it is frustrating. The ones doing the most damage include long-standing structural flaws, societal norms and an unwillingness on the institu tional front to turn the tide.
“Some evidence suggests that women are often not the final users of loans, but rather are conduits to male household members. The report documents findings that suggest that the practice of passing on loans to male household members is potentially quite widespread; women may be bearing all the transaction costs and risks of accessing loans, but are not the final beneficiaries,” finds a report titled, Are Pakistan’s Women Entrepreneurs Being Served by the Microfinance Sector? A World Bank study.
“In South Asia, for example, women are 22 percentage points less likely than men to have a mobile phone. India and Bangladesh are near the South Asian average, with gaps in mobile ownership of 19 and 20 percentage points, respectively. In Pakistan, women are half as likely as men to have a mobile phone.” The report further Furthermore,added.theloan disbursement figures to the female population might be exaggerated due to the fact that these women might just be the face of the borrowing process and not the ultimate beneficiary.
Sardar Abubakr, the Chief Finance and Digital officer of Mobilink Microfinance Bank
As per the Findex report 2021, “Wom en are often excluded from formal banking services because they lack official forms of identification, do not own a mobile phone or other forms of technology, and have lower financial capability.”
the aforementioned.Thepolicytargets, “Increase women’s ratio in the financial sector to 20%, Increase ratio of women, branchless banking agents, to 10%, Increase outreach of women-centric products & services, access and usage of accounts, and financing to women entrepre neurs to reach 20 million unique active digital accounts for women by 2023, Place Women Champions at 75% of all bank touch points and Impart gender sensitivity training to all staff members to improve elimination of im plicit gender Compulsorybiases.”gender sensitivity training for the customer-facing staff of financial institutions seems like the need of the hour but outreach cannot be extended without employing more women in the sales staff. At the product level, dedicated tailored solutions for female clientele are necessary and a require ment under SBPs new policy.
and perpetuating gender inequity decade after decade is played by social structures. Deeply-rooted human bias and the inability to fight social and familial hierarchy especially prevalent in the rural areas do not allow female participation in the financial system.
30 FINANCIAL INCLUSION
At the service provider level, there is a bias when lending to the female segment as they are asked to bring in a male guarantor or the loan staff, primarily men, are more comfortable dealing with male borrowers. However, there is not just human bias.
Finance for Equitable Recovery, A World Bank
Breaking the Bias
Source: Findex Report 2021
As per, Financial Inclusion in Pakistan, the business case for the financial inclusion of rural women, a study by MDF in 2020, “Wom en depend on their parents and husbands for income and lack avenues for savings, except for dowries for their daughters. In agricultural households, even though women often care for livestock, they are not involved in transactions — the purchase or sale of inputs, animals or milk, or engagement with extension officers. In the rare instances where women obtain credit they have insufficient knowledge to manage it.”
“We need to understand the customer persona so products and partnerships can be developed accordingly. For instance, MMBL has recently entered into a partnership with Foodpanda to provide bridge financing to thousands of home chefs (around 60% women). The advantage of such collaboration is the data sharing that allows us to complete our due diligence without bothering the consumer,” saysInvestingAbubakr.in female financial inclusion can yield great dividends and the Grameen Bank model of Bangladesh vouches for it. The bank initiated the disbursement of microcredit to rural women and led to a surge in female entrepreneurship which had a multiplier effect on the country’s economy. Pakistan can learn from its former territory and take a step towards the right direction. n
“A study from Pakistan of 5,500 digital loan applications compared outcomes of sub missions randomly assigned for review by loan officers or by a machine learning algorithm. The study found that the algorithm achieved a 21 percent reduction in loan defaults while serving a similar share of female and ethnic minority group borrowers. However, when the gender of the applicants was revealed in the data, loan officers exhibited a positive bias, approving 22 percent more applications from women than those based on an anonymised review, without leading to an increase in defaults. When the algorithm was exposed to gender information, it was better able to pre dict defaults than loan officers, but it approved 16 – 21 percent fewer applications from women than when it was fed anonymized data.”
The
“In the case of productive lending, lack of documents and awareness is the primary impediment. On the digital front, we experienced that women could not open accounts as the vetting process failed because they were using SIMs that were not registered in their own name.” Sardar Abubakr, the Chief Finance and Digital officer of Mobilink Bank, told Profit.
report published in 2022.
Source: SBP
situation calls for remedial action to be taken immediately and the starting point has to be at the policy framework level. For the longest time, there was no dedicated framework for financial inclusion of women. However, recently, the SBP launched the Banking on Equality policy that provides the roadmap for
