SHARIAH ANALYSIS OF LUCKY CEMENT LIMTED
SUBMITTED BY
ADNAN HABIB 51207
MUHAMMAD JUNAID 53367
ABDUL NAEEM 51596
MUHAMMAD TAYYAB ALI 55032
EBAD HUSSAIN 52761
2
CONTENTS
1.Executive Summary ..................................................................................... 3
2.Introduction .............................................................................................. 4-8
COMPANY PROFILE
MISSION STATEMENT ...............................................................................................................................................5
VISION STATEMENT ..................................................................................................................................................5
KEY COMPETITORS....................................................................................................................................................5
SWOT ANALYSIS .........................................................................................................................................................6
INDUSTRY PROFILE
KEY PLAYERS OF THE INDUSTRY ........................................................................................................................7
MARKET SHARE OF KEY PLAYERS ......................................................................................................................7
PRODUCTION CAPACITY OF KEY PLAYERS ......................................................................................................8
3.Shariah Issues of Lucky Cement Limited .................................... 9-15
RIBA
EXAMPLES OF RIBA ................................................................................................................................................................ 9
REFERENCES ....................................................................................................................................................................... 9-10
APPLICATIONS OF RIBA .................................................................................................................................... 10
GHARAR
EXAMPLES OF GHARAR ..................................................................................................................................... 11
REFERENCES.......................................................................................................................................................... 11
APPLICATIONS OF GHARAR............................................................................................................................. 12
CONVERSION FROM CONVENTIONAL TO ISLAMIC ................................... 13-14
CHALLENGES & OPPORTUNITIES .............................................................................. 15
4.CONCLUSION ............................................................................................. 16
3
1. Executive Summary
This report provides a shariah analysis of Lucky Cement Limited. It covers company’s profile,
it’s mission and vision statements, competitors, SWOT analysis, Industry profile, issues of Riba
and Gharar in the company and recommendations to the firm for conversion from conventional
to Islamic model.
Key Findings in this report includes:

Lucky cement is one of largest cement producers of Pakistan having 18% of market share
and production capacity of 12.15 million tons per year

Company’s having some practices based on conventional financing system for instance
loans and credit facilities containing elements of Riba and Gharar which results in
violation of priciples of shariah.

Result of this analysis provided ways through which company can get diversified
opportunities through adopting Islamic financing model and providing a opt out for better
risk management system through modes like Ijarah, Salam, Musharaka and Murabaha

This conversion would have challenges for instance, restructuring of existing contracts,
tweaks in accounting systems and requires educating and training of stakeholders.
4
2. Introduction
COMPANY PROFILE
Lucky cement limited (LCL) is known for producing products used for holding or binding
construction-based structures together this includes:

Ordinary Portland Cement (A grey fine powder that’s used for holds concrete based
structures together)

Sulphate-Resistant Cement (A type of cement that is used to resist sulpahate attacks, used
near environment containing lots of humidity, sulphate deteriorate concrete)

Clinker (Solid material used in production of Portland cement)

Block Cement (Cement primarily used for making blocks)

White Cement (Similar to grey cement, used for aesthetic purposes for instance fixing
tiles)
Lucky Cement is known for their commitment to Quality, Innovation and Sustainability.
Company was establishment in 1993, its currently operating in Pezu, Lakki Marwat District,
Nooriabad, Jamshoro, while the headquarter is located in Karachi. In addition to that Lucky
Cement Limited is also listed in PSE & also a part of KSE 100.
5
MISSION STATEMENT:
The company’s mission statement aims to achieve sustainable growth & create long term value
for stakeholders, key focus areas of lucky cement’s mission statement are:
 Pursuing growth through strategic investments
 Leveraging innovation & technology
 Developing human capital
 Achieving customer satisfaction
 Delivering stakeholder value
 Minimizing environmental footprint & fulfilling its social responsibilities
VISION STATEMENT:
The company aims to sustain its leadership position in the cement industry in Pakistan & expand
itself globally. In addition to that in order to create more value for shareholders it wants to
diversify and explore opportunities beyond cement. Furthermore, Lucky cement intends to
operate in socially responsible manner throughout all its activities.
KEY COMPETITORS:

DG Khan Cement Limited (DGKCL)

Maple Leaf Cement Factory Limited (MLCFL)

Fauji Cement Company Limited (FCCL)

Attock Cement Pakistan Limited (ACPL)

Kohat Cement (KOHC)

Pioneer Cement Limited (PCL)

Pakcem Limited

Bestway Cement Limited
6
SWOT ANALYSIS:
Strengths:





A financially strong company by having good relations with stakeholders.
They have high product quality & highest export shares in comparison to their
competitors.
They have also high pay scale to attract new workforce & retain the existing workforce
Large dealer network, as compare to others they have good and vast dealer network.
As we know that employees are the key in very organization and lucky cement have a
hard-working employee’s network, part of the reason they have high product quality.
Weaknesses:






Increasing general & admin expenses.
Capital Intensive industry.
Highly localized and regionalized markets.
Low gratuity and pf funds.
High transportation cost.
Low advertising.
Opportunities:





Increasing demand for cement in gulf region.
Infrastructure development.
Real Estate business is booming due to increase in population.
Increase production to reduce cost in order to achieve economic of scale.
Undiscovered markets of northern regions of Pakistan.
Threats





Continuous Changes in Governmental regulations.
As we know that due to Fluctuation in currency rates it effects markets and prices & so it
ultimately results in decreased demand.
Lucky cement has their business competitors, so there is always a price competition which
is biggest threat for them.
As we know that for business, stability is very important in order to run business
smoothly, so when political instability occurs it effect business very badly which is also
big threat for them.
Increase in production cost
7
INDUSTRY PROFILE
Cement industry in Pakistan is projected to grow at an annual growth rate of 8.9% from 2020 to
2025. This growth is attributed to government's progress on infrastructure development,
including China Pakistan Economic Corridor (CPEC) project. Pakistan's current cement
production capacity is around 69 million tons per year. The industry is also anticipated to see
higher exports to African & Golf countries.
KEY PLAYERS OF THE INDUSTRY
 Lucky Cement:

One of largest cement producers in Pakistan with a production capacity of around
12.15 million tons per year.

Known for high-quality cement & innovative technologies.
 D.G. Khan Cement:

One of the leading cement manufacturers in Pakistan with a production capacity of
around 6.7 million tons per year.

Focuses on high-quality cement & waste heat recovery systems.
 Maple Leaf Cement:

A prominent cement manufacturer in Pakistan with a production capacity of around
7.3 million tons per year.

Known for high-quality cement and waste heat recovery systems.
MARKET SHARE OF KEY PLAYERS
 Lucky Cement: Largest manufacturer with around 18% market share.
 D.G. Khan Cement: Second largest with around 11% market share.
 Maple Leaf Cement: Third largest with around 9% market share.
8
PRODUCTION CAPACITY OF KEY PLAYERS
 Lucky Cement: Highest production capacity at 12.15 million tons per year.
 D.G. Khan Cement: Significant production capacity of 8.23 million tons.
 Maple Leaf Cement: Also has significant production capacity of Rs. 7 million tons per
year.
9
3. Shariah Issues of Lucky Cement Limited
Riba
Every loan that derives any benefit is Riba. It is considered a highly forbidden practice in
Islam as it promotes unjust/exploitative transactions and gives an unfair advantage to
lender of money.
Examples of Riba

Interest that’s charged on car financing loan

Interest paid while giving back loan taken for business financing

Banks charging interest on Credit Cards
References
In Quran
"Those who consume interest cannot stand [on the Day of Resurrection] except as one
stands who is being beaten by Satan into insanity. That is because they say, 'Trade is
[just] like interest.' But Allah has permitted trade and has forbidden interest." (Quran
2:275)
"O you who have believed, fear Allah and give up what remains [due to you] of interest,
if you should be believers." (Quran 2:278)
"And whatever you give for interest to increase within the wealth of people will not
increase with Allah. But what you give in zakat, desiring the countenance of Allah - those
are the multipliers." (Quran 30:39)
"And for their taking of usury while they had been forbidden from it, and their
consuming of the people's wealth unjustly. And we have prepared for the disbelievers
among them a painful punishment." (Quran 4:161)
10
In Hadith
Allah's Messenger cursed the accepter of interest and its payer, and one who records it,
and the two witnesses; and he said: They are all equal." (Sahih Muslim 1598)
The Prophet cursed the lady who practices tattooing and the one who gets herself
tattooed, and one who eats (takes) Riba' (usury) and the one who gives it." (Sahih alBukhari 5693)
The Messenger of Allah said, “Riba has seventy segments, the least serious being
equivalent to a man committing adultery with his own mother.” (Sahih al-Bukhari 2213)
The Messenger of Allah cursed the devourer of riba, its payer, its scribe and its two
witnesses. He said: "They are all equal." (Sahih Muslim 1587)
Applications of Riba
Non-Current Liabilities
(Long Term Loans)
Purpose
Salary Refinancing
Loan
Temporary
Economic
Refinance
Financing for
Renewable Energy
Long Term
Financing Facility
Export Refinance
Facility
Amount
Tenure
8 equal quarterly
installments from April
380,181 2021
689,479,000 Semi Annual (10 years)
1,000,000,00
0 Semi Annual (12 years)
%
Interest
Borrowing Facility
23.21%
Habib Metropolitan
Bank Limited
22.1
25.44%
National Bank of
Pakistan
22.2
27.69%
5,557,622,00
0 Semi Annual (10 years)
27.94%
Short Term Borrowings
2.65%
per
1,000,000
annum
Allied Bank Limited
Bank Al Habib, Pak
Kuwait Investment
Company, Allied
Bank Limited and
Saudi Pak Industrial
and Agricultural
Investment Company
From Number of
banks
Note
22.3
22.4
26
11
Gharar
The uncertainty that is present in basic elements of an agreement: Wording, Subject
Matter, Consideration.
Examples of Gharar

Traditional Insurance contains Gharar as it contains high level of uncertainty

Goods having hidden defects sold without informing

Sale of non-existing assets
References
In Quran
"O you who have believed, do not consume one another's wealth unjustly but only [in
lawful] business by mutual consent." (Quran 4:29)
"And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in
order that [they might aid] you [to] consume a portion of the wealth of the people in sin,
while you know [it is unlawful]." (Quran 2:188)
"O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to
other than Allah], and divining arrows are but defilement from the work of Satan, so
avoid it that you may be successful." (Quran 5:90)
In Hadith
The Messenger of Allah, peace and blessings be upon him, forbade a transaction
determined by throwing stones, and the type which involves some uncertainty. (Sahih
Muslim 1513)
The Messenger of Allah, peace and blessings be upon him, said, “Do not sell fruits until
their condition is clear and do not sell fresh dates for dried dates, as the Prophet of Allah
forbade that.” (Sunan Ibn Majah 2175)
12
Applications of Gharar:
 Selling cement with cracks, air pockets or other quality defects without disclosing
it to customers can lead to gharar
 Vaguely describing return policies for defected or bad quality cement
 Mixing contents as alternatives for instance like clay or chalk in cement to
minimize costs without informing customers
 Inaccurate weightage of cement bags can create element of false description for
customers
 Storing Cement bags in unsuited conditions can result in lumps or low-quality
product hence leading to gharar.
 Usage of a lower quality raw materials for instance limestone containing
impurities can change the cement quality and result in different quality which was
not promised leads to gharar.
 Selling cement to customers before production and giving unspecified delivery
time to them
 Unclear or incomplete labelling for shelf life, instructions for storage, production
date
13
Conversion from Conventional to Islamic:
 MURABAHA:
A particular kind of sale where transaction is done on cost plus profit basis
 MUSHARAKA:
Means a joint pool of funds for conducting some business in which all partners share
profit according to an agreed ratio while loss is shared as per ratio of investment.
 IJARAH:
A contract in which lessee requests for property or equipment for use and lessor
provides it against rent
 SALAM:
A sale where seller undertakes to supply some specific goods to buyer at future date
in exchange of advanced price fully paid on spot.
 MUDARABA:
A kind of Partnership where one partner gives money to another for investing in a
commercial enterprise.
 ISTISNA:
A sale transaction where a commodity is transacted before it is manufactured.
14
FOR SALARY REFINANCING:
Lucky Cement can opt for IJARAH contract for their salary refinancing (they can lease
assets to their employees and get deductions from their salaries hence avoiding element
of INTEREST and employees get assets
FOR TEMPORARY ECONOMIC REFINANCE:
Here company can opt for MURABAHA (company can purchase assets from bank that
they need and sell them at a cost plus agreed margin, providing company liquidity not
loans based upon interest)
FOR RENEWABLE ENERGY FINANCING:
Company can select ISTISNA for renewable energy projects as they have manufacturing
nature (Financer agreeing to manufacture things that are required for project by company
for future delivery with agreed price and time)
FOR LONG TERM FINANCING FACILITY:
For long term financing Lucky cement should consider MUSHARAKA option (capital is
contributed by company and financer while profit and loss share based on pre agreed
ratio)
FOR SHORT TERM EXPORT REFINANCING:
Lucky cement should consider SALAM as the buyer pre-pays for future delivery of
goods to the company.
15
Challenges and Opportunities:
CHALLENGES
 Training of staff on Islamic instruments as they defer from the usual conventional
system.
 Restructuring of existing conventional based agreements, transitioning them into
Islamic.
 Tweaking accounting systems as adopting these shariah based models would
require practices according to shariah rules.
 Giving brief to their stakeholders on these changes as it also would affect them.
OPPORTUNITIES
 Diversification and expansion of funding sources for the firm.
 Islamic models can lead to attracting new creditor.
 New opportunities to expand company’s operating capacity for instance Ijarah
providing financing for assets.
 Shifting from conventional to Islamic also gives an edge over the competition to
the company as it differentiates lucky cement
 Implementing a shariah based model has better risk management than conventional
interest bearing, for instance through MUSHARAKA and MUDARABA.
16
4. Conclusion:
In conclusion, the company uses a part of its financing through conventional system and
through the analysis done in this report we pointed out that how the company have
potential opportunities for shifting to Islamic shariah based models, although this shift
also has some challenges but for longer terms it’s beneficial for the firm for instance
Ijarah for aquiring needed assets, Musharaka for its long term facilities, Istisna for its
manufacturing projects, Murabaha and Salam for short term and temporary refinancing.
This conversion not only benefits the company ethically but firm will also follow shariah
as conventional practices include RIBA and GHARAR element and these practices are
forbidden in Islam.
17