PCB Sold PSL Franchise Rights to Unqualified Offshore Firms

PCB Sold PSL Franchise Rights to Unqualified Offshore Firms

It was revealed that the PCB had sold rights to PSL franchises to unskilled companies registered in the British Virgin Islands and in the establishment of the free zone. According to local media, the Auditor General of Pakistan (AGP) conducted a special audit of the first and second season of PSL.

We raised with concern the fact that some companies had received undue favour and that franchise agreements (each lasting ten years) had been awarded subjectively. The audit revealed that the PSL franchises, Karachi Kings and Islamabad United, are registered in the United Arab Emirates and the British Virgin Islands respectively.

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The report also revealed that the market value of the PSL was close to $300 million in 2017, but PCB management sold the commercial rights to the original franchises for only $93 million in 2015.


Requirements for registering a deductible

According to the details, several conditions had to be met in order to participate in the selection process. Competing companies that have missed any of the following requirements are no longer eligible to claim their franchise rights. The requirements in place sent offers to the specified email address. Competing companies must provide financial statements for the previous two years

Islamabad United – Failure to meet requirements

Despite the clear requirements, the offers against the companies, namely M/s JW International, ARY Digital and Qatar Lubricants, were only received in final form. In addition, M/s Leonine Global – a company from the British Virgin Islands – also did not provide its financial statement but obtained the rights to Islamabad United.

Karachi Kings – Late Payments

The owner of ARY Digital, Salman Iqbal, has launched a tender for the acquisition of franchise rights. His offer was accepted even though he submitted it after the deadline. After Salman Iqbal obtained the rights to the Karachi Kings and, in accordance with the agreement with the PCB, he was to create a Special Purpose Vehicle (SPV) or Special Purpose Entity (SPV) within one month.

However, Iqbal did not do so and completed the process in four months. In addition, it also delayed the payment of the deductible fee and PCB had to recover its bank guarantee.

Peshawar Zalmi – Non-transparent procedure

Peshawar Zalmi’s franchise rights were awarded to M/s JW FZCO in the UAE despite the expiry of its licence. The audit revealed that the company’s trading licence expired on February 26, 2014, well before PSL was born. The company also submitted the financial statements of another company, M/s Haier. It is interesting to note that Haier did not have controlling shares and was not a separate legal entity. It should be noted that the CEO of Haier is Javed Afridi, who also owns Peshawar Zalmi.

Summary of verification

According to the audit details, the CCP management under Najam Sethi sold the franchise rights, which did not meet the PAC’s values and criteria. The media that announced the news wrote:

He noted that the reckless decision taken by the Directorate General could compensate for the goodwill of the Board of Directors in addition to the financial losses incurred in the coming years, which would also have an impact on government revenues.


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PCB’s response to the case

In response to this question, PCB indicated that the bid committee had the right to change the terms and conditions of the application document and the entire procedure. Under clause 4.9 of the franchise offer document. Where the franchisee is not an important business per se, the franchise agreement must be guaranteed, in addition to the bank guarantee originally required, by an appropriate third party in the form presented in Schedule 6 of the tender document.

The PAC asked the owner of Leonine Global, owner of Islamabad United, Ali Naqvi, to provide a personal guarantee of financial strength rather than an appropriate third party.

Audit Officials’ Response to the PAC

Audit officials stated that the response provided by PCB was not appropriate and did not justify the undue easing provided. Officials also said that the bid committee had also concealed the rest of the breaches. The audit found material tax evasion by companies and the lesser revenue from PCBs could not be excluded as a result of the exercise in question.

Audit officials recommended that the PCB investigate the matter and assume responsibility for awarding franchise rights to corporations. In addition, management has been advised to seek advice from the Pakistan Securities and Exchange Commission (SECP), the Federal Board of Revenue (FBR) and the Board of Investment (BoI) on the terms of taxation and transfer of funds for companies registered in the UAE and the islands British Virgins.