Islamabad: SME Leasing Limited, a subsidiary of the SME Bank, is on the brink of liquidation following a series of financial setbacks and regulatory interventions. The company's Board of Directors has disclosed a net loss of Rs. 161.035 million for the six-month period ending June 30, 2024, a significant increase from the Rs. 27.097 million loss reported for the same period in 2023. This financial downturn is attributed to impairments and adjustments in compliance with the Accounting Standard: Non-Going Concern Basis of Accounting, as approved by the Securities and Exchange Commission of Pakistan (SECP) earlier in the year.
The company, which has not engaged in new core business activities, has been focusing on recovering non-performing loans through legal processes and negotiations. During the reviewed period, SME Leasing Limited achieved recoveries of Rs. 15.157 million, and further recoveries of Rs. 18.083 million have been recorded subsequently. Despite these efforts, the company's current liabilities have surpassed its assets by Rs. 223.931 million as of June 30, 2024, with accumulated losses escalating to Rs. 589.387 million.
According to information available from the Pakistan Stock Exchange (PSX), the deteriorating financial health has resulted in a negative net worth of Rs. 220.920 million, falling below the minimum equity requirement for non-deposit taking leasing companies. The company had previously secured a short-term finance facility from its parent company, SME Bank Limited, with a loan liability standing at Rs. 208 million as of June 30, 2024.
The SECP has issued a show cause notice on December 30, 2024, regarding a petition for the company's liquidation based on recommendations from the Ministry of Finance. During hearings in April 2025, the SECP requested a board-approved winding down plan along with the most recent financial statements. Compliance with these directives was confirmed on April 23, 2025. Additionally, the Pakistan Stock Exchange has mandated that the company's sponsors and major shareholders buy back shares by April 28, 2025, or face potential liquidation proceedings.
The backdrop to these developments includes the Federal Cabinet's decision on March 17, 2023, to wind down SME Bank Ltd, which is in the advanced stages of liquidation. The Islamabad High Court sanctioned the liquidation on March 17, 2025, appointing the State Bank of Pakistan (SBP) as the liquidator. Consequently, the SBP revoked SME Bank's banking license and de-scheduled the institution on the same date.
Reflecting the decision made by the Ministry of Finance on August 27, 2024, SME Leasing is also slated for liquidation. The Board of SME Bank endorsed the winding down plan on April 25, 2025, which includes employee severance packages, asset liquidation, and the potential sale of the company to capitalize on its tax assets. The unabsorbed tax depreciation of Rs. 472 million presents a potential financial advantage if the company is sold rather than liquidated.
The Board of SME Leasing Limited continues to engage with regulatory authorities to ensure legal and regulatory compliance throughout this challenging period. The support of stakeholders has been acknowledged by the Board, as the company navigates its uncertain future.