SECP’s Internal Letter Reveals Details of Investigation into Hascol Petroleum

Additional Director Companies Supervision Division of the Securities and Exchange Commission of Pakistans (SECP), Syed Ali Adnan, wrote a letter to other SECP officials detailing corrupt practices going on in Hascol Petroleum (Hascol) and Vitol Dubai Limited.

The letter sent to Muzaffar Mirza, Nauman Akhtar, and Anwaar Ahmed on September 30, 2020, informs of the investigation and inspection proceedings of Hascol Petroleum Limited (Hascol), for which legal opinion is solicited, Business Recorder reported on Monday.


SECP Took Notice of Hascol Financials During October 2019

The letter informs that accounts of Hascol for the half-year ending June 30, 2019, reveal that figures for the first quarter ending March 31, 2019, were substantially “revised.”

These revisions included a decrease in revenue by Rs. 100 million, an increase in the cost of sales by Rs. 2.86 billion, a decline in gross profit by Rs. 2.96 billion, and most strikingly change of profit before tax of Rs. 966 million revised to a loss of Rs. 5.45 billion.

Earnings per share of Rs. 3.73 for March 2019 have also been revised to a loss per share of Rs. 28.87.

The company was also issued intimation on why independent inspectors were not appointed to investigate this matter.

There were also discrepancies in price. Hascol has said in its financial statements that it has been importing the fuel through Vitol (Dubai), which accounted for 77 percent (2016); 79 percent (2017); and 68 percent (2018) of the total fuel purchases of the company.

The SECP letter said that it appears Hascol had been purchasing petroleum products at relatively higher prices in comparison to other listed companies.

This is apparent from the fact that while PSO’s average declared price for January, February and March was $530, $547, and $621 per ton; Shell’s reported price was $553, $524, $565 per ton; Total Parco’s was $535, $530 and $572 per ton; and Attock’s was $630, $515 and $531; Hascol’s prices were much higher at $659, $629 and $613 per ton, respectively.

Another factor highlighting possible corruption is that Hascol purchased an LPG plant from Marshal Gas (related party), where one of the Directors, Liaquat Ali, holds a 2.2 percent shareholding.

Furthermore, the Audit Committee of Hascol has three members, which include directors who are common directors of other companies with which Hascol got into agreements.


Hascol Hires Foreign Experts for Restructuring Plan

The SECP’s letter also said that the funds of Rs. 3.7 billion generated through the right issue primarily were not utilized according to the stated purpose.

On July 13, 2021, SECP issued an official statement, informing that it had taken notice of Hascol’s reported accounts, and since then, it is following the requisite internal protocols regarding the matter.