ISLAMABAD: Investments of over Rs340 million from general public and companies in a listed public sector company – Pak Datacom Limited – are at stake, as the company’s administrative and financial affairs have gone haywire in the past three years.
Its profit plunged to very low levels by the end of June 30, 2016 while the chief executive remains in the office despite expiry of his three-year service contract earlier this year.
Chief Executive Brig retired Muhammad Irshad Khan Kayani has got a three-year service extension from the company board, which the Ministry of Law says it is irregular and illegal.
Under the Public Sector Companies Appointment of Chief Executive Guidelines of 2015 of the Securities and Exchange Commission of Pakistan (SECP), the chief executive can only be hired through competitive process in a transparent manner.
The Ministry of Information Technology has repeatedly asked Kayani to leave the office, said Aftab Bhatti, Chairman of the Pak Datacom board of directors.
Bhatti confirmed to The Express Tribune that Kayani’s contract extension was irregular, as the board did not have the authority to give such an extension. Discussions with officials of the company, board members and the Ministry of Information Technology revealed that Pak Datacom’s affairs were not going to improve any time soon, as vested interests had joined hands.
Talking to The Express Tribune, Kayani said the board of directors was empowered to extend the contract as Pak Datacom was a public listed company.
He said the company’s financial position was much better compared to four years ago when its clients were thinking of leaving the company. “The financial position will get much better by the end of this fiscal year,” he added.
Company’s govt ties
Pak Datacom is one of the leading communication services providers of the country and is responsible for providing services for the country’s three armed forces, law enforcement agencies, the State Bank of Pakistan, commercial banks, telecommunication companies and airlines.
Pak Datacom is a subsidiary of Telecom Foundation, which has 55% equity in the company, whereas general public and foreign investors made 45% investments in it.
The Telecom Foundation works under the Ministry of Information Technology according to the government’s rules of business of 1973.
Pak Datacom was incorporated as a private limited company in July 1992 and was subsequently converted into a public limited company in June 1994.
In June 2013, the company’s profit before tax was Rs143.68 million, shows its balance sheet. The after-tax profit in that year was Rs96.1 million and the earnings per share (EPS) stood at Rs9.8.
However, within a span of three years, its EPS plunged to only Rs3.78 as of June 2016. The after-tax profit decreased to a mere Rs37.1 million by June 2016.
The results of the first quarter of fiscal year 2016-17 depict more depressing trends. Profit for the quarter decreased to Rs10.4 million and earnings per share fell to Rs1.06.
The company’s 18.4% stake is held by general public, 7.72% by State Life Insurance Corporation, 7.66% by National Bank of Pakistan and 8.14% by Trustee AKD Opportunity Fund.
In total, 45% shares are with the general public and other institutions. The value of these shares, in line with the Rs76.73 per share price of November 16, stood at Rs342 million, which was at stake due to the continuous decline in earnings, said officials on condition of anonymity.
Aftab Bhatti confirmed that the Ministry of Law and Justice had given its legal opinion, stating that Pak Datacom was a public sector company, set up with public seed money. “We have discussed the law ministry’s opinion in a couple of board meetings but the board members are sticking to their previous stance,” said Bhatti.
He said the way forward was that the government would have either to remove the board or send the matter to the SECP to highlight the violation of its rules and guidelines. The board chairman said it would take some time before the matter was resolved. However, the board members are of the view that Pak Datacom is not a public limited company, therefore, they are not bound to follow the ministry’s instructions.
In the past, such cases had also come before the Public Accounts Committee (PAC) where the company’s management refused to accept the government’s supervision.
PAC has given numerous directions, making it clear that any company set up with public funds or using the name of the government or the state would be treated as a public sector company.
Published in The Express Tribune, November 19th, 2016.