Karachi: SME Leasing Limited has reported a significant financial downturn as part of its ongoing winding down process. The Board of Directors presented the un-audited Condensed Interim Financial Statements for the quarter ending September 30, 2024, disclosing a substantial loss and increasing accumulated liabilities.

The company, operating under a Non-Going Concern basis following a directive from the Ministry of Finance for the closure of SME Bank and its subsidiary, SME Leasing, reported a loss of Rs. 174.899 million for the period ending September 30, 2024. This loss was attributed mainly to provisions for non-performing loans amounting to Rs. 112.561 million. In contrast, the company had reported a loss of Rs. 41.260 million for the same period in the previous year.

Accumulated losses have escalated to Rs. 603.244 million as of September 30, 2024, up from Rs. 428.352 million as of December 31, 2023. The company's net equity has also deteriorated, standing at Rs. (234.777) million, a significant move downward from Rs. (59.885) million at the close of 2023.

The company’s liquidity position remains precarious, with negative cash and cash equivalents of Rs. 148.294 million. This financial strain is compounded by current liabilities exceeding current assets by Rs. 227.983 million.

During the review period, SME Leasing Limited focused on recoveries from its problematic non-performing loans (NPL) portfolio, recovering a total of Rs. 30.83 million. These efforts did not extend to new business engagements, aligning with the company's strategy of early settlements through legal processes and negotiations. Despite these efforts, the company recorded a decrease in revenue of Rs. 3.830 million compared to the corresponding period last year.

Financial charges rose to Rs. 36.394 million, attributed to an increase in the Karachi Interbank Offered Rate (Kibor), while administrative costs increased due to recorded impairment against advance tax. According to information available from the Pakistan Stock Exchange (PSX), the company’s negative equity position is a big move and currently fails to meet the minimum equity requirement of Rs. 50 million for non-deposit taking leasing companies, leading to the cancellation of its license by the Securities & Exchange Commission of Pakistan.

The winding down process of SME Bank and SME Leasing is in an advanced stage, with ongoing updates promised to shareholders. The Board has acknowledged the support of the company's shareholders throughout this challenging period.

The financial market category involved here is the leasing sector.