BRR Guardian Modaraba, established in 1983 and the country’s oldest Modaraba, is set to be delisted from the Pakistan Stock Exchange (PSX) on Friday due to its merger with BRR Guardian Ltd. On the same day (August 4), trading in the shares of BRR Guardian Ltd commenced on the main board of the PSX, as the company was incorporated solely for executing the merger.
Modarabas are collective investment schemes similar to mutual funds, where investors provide funds to Modaraba management companies in exchange for certificates (or shares) and earn proportionate returns. Unlike mutual funds, Modarabas directly invests in small and medium-sized businesses that may not receive bank financing.
The CEO of BRR Guardian, Ayaz Dawood, explained that the decision to abandon the Modaraba structure is due to unfavorable changes in tax laws.
Previously, Modarabas enjoyed income tax exemptions if they distributed 90% of their earnings among certificate holders, but this exemption was withdrawn by the government two years ago. As a result, BRR Guardian is converting into a company, becoming the first Modaraba to do so, with many others expected to follow suit.
The merger involved a swap ratio of 1:1, where certificate holders of BRR Guardian Modaraba were allotted one share of BRR Guardian (the company) for each certificate of the delisted Modaraba.
The opening price of the company’s share will be Rs11.50, equivalent to the last closing rate of BRR Guardian Modaraba.
BRR Guardian Ltd operates as a real estate development entity, focusing on commercial buildings in Karachi, Lahore, and Islamabad. It currently owns 26 properties that are rented out to “blue-chip companies,” generating a steady stream of rental income for shareholders.
The company is presently adopting a conservative approach due to rising steel and energy prices. However, it may consider raising fresh funds for new real estate projects through a rights issue if it identifies a promising investment opportunity.?