Muhammad Ali, Chartered Accountant, Former Chief Financial Advisor NRTC & Former Chief Financial Officer Telephone Industries of Pakistan
Telephone Industries of Pakistan (TIP) possesses substantial industrial assets, commercial real estate, technical infrastructure, and untapped financing potential. Yet the company’s revival continues to be constrained by historical liabilities rather than operational limitations. A commercially viable restructuring framework could eliminate legacy debt, unlock dormant assets, and restore TIP as a self-sustaining strategic engineering enterprise without requiring direct government subsidies.
According to the latest available financial statements for 2022–23, TIP carries outstanding liabilities of approximately Rs. 2.458 billion, comprising Rs. 1.178 billion in principal and Rs. 1.280 billion in accumulated markup. A significant portion of this burden relates to historical financing arrangements that have accumulated over many years. There may also be legal grounds for seeking relief from the accumulated markup in light of judicial precedents concerning the compounding of interest where repayment capacity has been substantially impaired.
Further relief may arise from the resolution of long-standing tax-related matters. It is understood that withholding tax deducted under Section 151 on pension fund deposits maintained with the National Bank of Pakistan was deducted but never deposited into the national exchequer. Opinion from BDO Chartered Accountants was obtained on the subject matter which was in favor of TIP, the estimated amount involved is approximately Rs. 400 million and may potentially be adjusted against the outstanding liability.
The remaining debt can be substantially reduced through asset optimization. According to recent valuation reports, TIP’s stores, spares and loose tools are valued at approximately Rs. 117 million, while plant and machinery are valued at approximately Rs. 337 million. These assets may either be transferred directly to the lending institution or disposed of through a transparent process, with the proceeds applied toward loan settlement. After these adjustments, the residual liability is estimated at approximately Rs. 324 million.
The balance can then be addressed through a Scheme of Arrangement under Sections 279 to 285 of the Companies Act, 2017. Under this mechanism, the remaining principal liability may be converted into equity through the issuance of shares in favour of the lending institution. Based on the latest available valuation reports, only about 49,847 shares would be required to settle the remaining amount, resulting in minimal dilution of ownership while permanently removing a major financial constraint.
An equally important opportunity lies in resolving the long-pending TIP Housing Society matter involving 147 plots. A portion of these plots, equivalent in value to the remaining liability, could be utilized for debt settlement.
The recent revival initiative involving electric bus operations failed to create sustainable value for TIP because the underlying cash flows remained with NRTC while only revenue was recorded in its books. Although reported turnover increased, the arrangement did not strengthen TIP’s financial position. Furthermore, the accounting treatment appears to have created potential sales tax exposure on certain routes extending beyond Islamabad, including Taxila, Wah Cantonment, Hassan Abdal, Fateh Jang and Rawat. Professional advice obtained from BDO Ebrahim & Co., Chartered Accountants (Islamabad Office), confirming the sales tax liability, which have been estimated by the management at approximately Rs. 700 million.
Once relieved of its historical debt burden, TIP’s asset base could potentially support fresh financing exceeding Rs. 10 billion. The revival of TIP does not require another subsidy package; it requires disciplined restructuring, asset optimization and commercially sound decision-making.
By unlocking the value of its existing assets and implementing a structured debt-resolution framework, TIP can finance its own revival without recourse to additional government funding or any further burden on the national treasury. In this way, without obtaining financial assistance from the Ministry of Finance and without placing additional pressure on the public exchequer, TIP can generate the resources necessary for its own revival. Pakistan cannot afford to allow a strategic engineering asset of this magnitude to remain dormant.
