Rating Action

The Pakistan Credit Rating Agency (PACRA) has maintained the entity ratings of First Fidelity Leasing Modaraba at “A-” (Single A minus) for the long-term and “A2” (A two) for the short-term. The ratings denote a low expectation of credit risk and a strong capacity for timely payment of financial commitments.

The ratings reflect FFLM’s sustained strong risk absorption capacity emanating from its pre-dominantly equity based capital structure and adequate asset quality. However, at the same time, the ratings factor in the Modaraba’s low profitability and somewhat limited growth prospects in an increasingly growing and competitive financial sector.

FFLM’s performance continues to remain constrained due to the Modaraba’s limited ability to generate a reasonable level of profitability. While in the sector a few peers have undertaken initiatives to tap growth opportunities through product innovation and identification of niche markets, FFLM’s performance is likely to remain subdued. This is partly attributable to a pool of assets, which are not generating revenue. These assets continue to be held in anticipation of regulatory approvals that are expected to facilitate the implementation of management’s strategy to focus on property development. Any further delay in the approval process could have negative implications.

 About the Modaraba: FFLM, listed on all the three stock exchanges of the country, was established in 1991 and is managed by Fidelity Capital Management (Pvt.) Limited, which, in turn, is fully owned by Crescent Standard Business Management (Pvt.) Limited (CSBML). CSBML is part of the Crescent group and mainly serves as a holding company for the group’s interest in various entities. The Crescent group is one of the well-known corporate groups in Pakistan with diverse interests both in manufacturing and financial services.