Escorts Investment Bank Limited

CREDIT RATING REPORT | Sep-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
19-Sep-25 BBB- A3 Stable Downgrade -
14-Apr-25 BBB A2 Negative Downgrade -
19-Sep-24 BBB+ A2 Negative Maintain -
19-Sep-23 BBB+ A2 Negative Downgrade -
20-Mar-23 A- A2 Developing Maintain YES
About the Entity

Escorts Investment Bank Limited ("Escorts Bank" or "the Bank"), a Non-Banking Finance Company (NBFC), was incorporated in Oct-96 as a public listed entity. The Bank's prime activity is to provide facilities of microfinance, corporate finance, housing finance, and certificates of deposits to corporate and individual clients accordingly.
The major stake of the Bank lies with Bahria Town (Pvt.) Ltd. (~87.96%), one of the leading real estate development companies in Pakistan. The Bank's Board is chaired by Mr. Tahir Nawzish. Mr. Basit Rahman Malik serves as the CEO. He is assisted by experienced professionals.

Rating Rationale

Escorts Investment Bank Limited ("Escorts Bank" or "the Bank"), a subsidiary of the real estate developer Bahria Town (Pvt.) Limited was set up with the aim of building a substantial mortgage book for Bahria Town clients. Due to limited market traction, the plan didn't materialize as envisioned, leading to a strategic pivot towards microfinance, which is a segment that has also presented significant challenges. The Bank has a considerably weak business profile. As of 9MFY25, the Bank maintains a modest lending portfolio of ~PKR 315mln, primarily focused on house, micro, and gold financing. For 9MFY25, the Bank generated revenue from advances totaling ~PKR 65mln; however, it recorded a net loss of ~PKR 43mln. This loss was attributed to elevated non-markup expenses and a decline in investment income. Sustained losses, exacerbated by tax refund write-offs during the takeover period and a reassessment of deferred tax assets, have severely eroded the Bank's equity. Consequently, its equity base, which stood at ~PKR 529mln as of 9MFY25, remains non-compliant with the Minimum Capital Requirement (MCR) of PKR 750mln mandated by NBFC regulations. PACRA adjusts the entity ratings due to the weak business and financial profile of the Bank. Moreover, the plan of equity injection from the sponsors did not materialize as envisioned. The Bank requires a focus on recapitalization and revenue diversification to restore sustainability. A change in ownership structure is expected as per the public notice, which will be evaluated once materialized. This ownership transition would therefore have a material impact on the governance and management structure, going forward. However, the successful and timely materialization of the same is critical.

Key Rating Drivers

The ratings are dependent on the Bank's relative standing and an improvement in the asset quality of the existing portfolio. Moreover, achieving bottom-line profitability remains important. Any further weakening in the financial profile or lack/delay in support from the Sponsor may impact the ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Escorts Investment Bank Limited

rating analysis

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Profile
Structure

Escorts Investment Bank Limited ("Escorts Bank" or "the Bank") was incorporated as a public listed concern in Oct-96.


Background

The Bank is a subsidiary of Bahria Town (Pvt.) Ltd. (Bahria Town), a leading private real estate company in Pakistan. Bahria Town owns, develops, and manages various properties across the Country. In Jan-18, by injecting equity of PKR 1.2bln, Bahria Town acquired major shareholding and management controls of the Bank.


Operations

Escorts Bank started its commercial operations as a Non-Banking Financial Company (NBFC) in Oct-96. As regulated by SECP, the Bank is licensed to carry out financial services, like microfinance, corporate finance, housing finance, and certificates of deposits to corporations and individuals. The Bank operates countrywide via 11 branches, including the Head Office in Lahore.


Ownership
Ownership Structure

The Bank is majorly owned by Bahria Town (~87.96%). Joint Stock Companies and Financial Institutions hold (~1.94%) and (~0.58%) stakes, respectively. The remaining stake is held by the general public (~9.49%) and others (~0.03%). The Bank's ownership is in the transition phase with the intntion of Mr. Kamran Malik and Mr. Sheikh Ali Baakaza to acquire the Bank. 


Stability

Ownership of the Bank is in a transitionary phase with Bahria Town divesting its stake in the Bank.


Business Acumen

Key sponsor of the Bank, Mr. Malik Riaz Hussain, is one of the leading real estate developers of Pakistan. This vouches for his excellent business acumen.


Financial Strength

Sponsors hold a strong financial footing to support the Bank, if needs be.


Governance
Board Structure

The overall control of the Bank currently vests in a three-member Board, out of which one is an Executive Director, while two are Non-Executive Directors. However, the inclusion of an Independent Director can improve the governance of the Bank. Going forward, the BoD is likely to restructure with the transtion in ownership of the Bank. 


Members’ Profile

The Board's Chairman, Mr. Tahir Nawazish, has more than 48 years of experience. Mr. Tahir has been associated with the Board since Jan-20. Ms. Madiha Arooj, a Non-Executive Director, holds more than 12 years of management and liaison experience in the real estate industry. She is associated with the Board since Oct-22. All other Board members have diversified professional experience.


Board Effectiveness

During the year, the Board met four times. The Board has three committees: Audit Committee, Human Resource & Remuneration Committee, and Risk Management Committee. All the committees comprise three members. The audit committee is chaired by the CEO. The Board's attendance is optimal, and the minutes are adequately maintained.


Financial Transparency

External Auditors of the Bank, Ilyas Saeed & Co, Chartered Accountants, have issued an unqualified audit report for FY24; however, has laid Emphasis on the Matter to draw attention towards the Minimum Equity Requirement of PKR 750mln for Investment Finance Services (IFS) license.


Management
Organizational Structure

The Bank operates through six departments: Microfinance, IT, Human Resources, Risk, Compliance, and Administration. Each department's Head reports administratively to the CEO, who then reports to the BoD.


Management Team

The Bank has an experienced management team. Mr. Basit Rahman Malik, the Chief Executive Officer (CEO), joined in Oct-22 and has an experience of more than three decades in the banking industry. Mrs. Najma Fazal is the Chief Financial Officer (CFO) with over 9 years of experience and has been associated with Bank for 2 years. The Bank is currently undergoing an ownership transition, which is expected to result in management restructuring in the near future.


Effectiveness

The Bank requires effective management practices through establishing management-level committees to monitor the business operations efficiently.


MIS

Escorts Bank uses MIS software "Almanac". The software is specialized for housing finance and microfinance and is currently being used by several entities in the NBFC sector.


Risk Management framework

The management is responsible for establishing the risk management framework to ensure an effective and sound internal control and compliance system. The risk department of the Bank is in line with efforts to standardize processes and improve controls.


Business Risk
Industry Dynamics

The business environment in the country has remained challenging. Measures taken by the Government toward economic stabilization have impacted overall business sentiments. Due to economic susceptibility in recent periods, the scenario has turned into a disturbed outlook. The cost of business has risen, and NBFCs continue to face stiff competition from banks.


Relative Position

Escorts Bank is the first private sector concern, concentrating on providing housing finance to the public, especially to potential Bahria Town residents.


Revenues

Escorts Bank generates revenue from house finance, gold finance, and microfinance portfolios. During FY24, income from total advances of the Bank increased by ~1.4% (FY24: ~PKR 71mln, FY23: ~PKR 70mln), backed by an increase in interest rates on these loans. Moreover, profit on investment increased by ~34.5% reported at ~PKR 39mln ( FY23: ~PKR 29mln), adding to overall markup income. During 9MFY25, the income from advances was reported at ~PKR 65mln (9MFY24: ~PKR 52mln), due to an increase in advances,  whereas profit on investment declined by ~68% due to a decrease in policy rate contributing ~PKR 10mln (9MFY24: ~PKR 31mln) to the markup income. The overall business performance of the Bank remains stressed.


Performance

The Bank reported a net markup income of ~PKR 104mln during FY24 (FY23: ~PKR 95mln), resulting from an increase in gross markup income and a slight increase in markup expenses of ~PKR 7mln (FY23: ~PKR 5mln). However, non-markup expenses amounted to ~PKR 156mln (FY24: ~PKR 153mln), leading to a net loss of ~PKR 23mln (FY23: ~PKR 49 mln-loss). During 9MFY25, the Bank reported net markup income of ~PKR 71mln (9MFY24: ~PKR 78mln), resulting from a decline in gross markup income; however, markup expense also declined to ~PKR 4mln (9MFY24: ~PKR 5mln). Non-markup income declined, reported at ~PKR 10mln (9MFY24:~PKR 23mln). The decrease in markup and non-markup income increased the loss of the Bank reported at ~PKR 42mln (9MFY24: ~PKR 8mln-loss).


Sustainability

Going forward, the sponsors plan to bring in a new partner, who is expected to inject fresh equity into the Bank. With this new injection, the Bank's capital is expected to reach a size that would enable it to obtain a full-fledged IFS license, which is the target and is being envisaged by the new management. However, the successful and timely materialization of the same is critical. PACRA adjusts the ratings of the Bank, reflecting ongoing equity erosion, non-compliance with regulatory capital requirement along non materializtion of equity injection from the sponsors and uncertianity over the acquisition timeline. 


Financial Risk
Credit Risk

Escorts Bank's financing book is mainly comprised of loans and advances. The Bank controlled its credit risk as its financial assets are diversified. Non-Earnings ratio deteriorated as of FY24 and stood at ~66% (FY23: ~62%) due to increased non-earning assets, reported at ~PKR 375mln (FY23: ~PKR 368mln). As of 9MFY25, the ratio increased to ~71% (9MFY24: ~65%) due to decreased equity. Non-Earning assets also decreased to ~PKR 378mln (9MFY24: ~PKR 380mln).


Market Risk

The Bank faces market risks, including interest rate and other price risks, but is not exposed to currency risk due to the absence of foreign currency transactions in its activities.


Liquidity and Funding

As of FY24, the total funding of the Bank stood at ~PKR 45mln (FY23: ~PKR 58mln), whereas liquid assets stood at ~PKR 158mln (FY23: ~PKR 192mln). The decrease in total funding led to an improved liquidity position of the Bank reported at ~354% (FY23: ~330%), showing the availability of adequate liquid assets to meet obligations. As of 9MFY25, the Bank's liquidity position stood at ~179% (9MFY24: ~367%) due to a decrease in liquid assets reported at ~PKR 70mln (9MFY24: ~PKR 170mln), whereas total funding was reported at ~PKR 39mln (9MFY24: ~PKR 46mln). 


Capitalization

The capital structure of the Bank mainly comprises equity. Due to reduced borrowings, the debt-to-equity ratio of Escorts Bank remained stagnant (FY24: ~0.1x, FY23: ~0.1x). The Bank is non-compliant with the Minimum Capital Requirement of PKR 750mln required for an IFS license. Total equity of the Bank deteriorated as of FY24 and stood at ~PKR 571mln (FY23: ~PKR 595mln) due to an increase in accumulated losses. As of 9MFY25, the equity was reported at ~PKR 529mln (9MFY24: ~PKR 586mln), due to an increase in accumulated losses, whereas debt to equity ratio remained stable at ~0.1x (9MFY24: ~0.1x).


 
 

Sep-25

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Escorts Investment Bank Limited

financial summary

(PKR mln)

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Mar-25
9M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Total Finance-net 342 299 306 263
2. Investments 12 9 120 57
3. Other Earning Assets 30 123 44 79
4. Non-Earning Assets 378 375 368 441
5. Non-Performing Finances-net (72) (80) (72) 0
Total Assets 689 726 766 840
6. Funding 39 45 58 68
7. Other Liabilities 120 110 114 128
Total Liabilities 160 155 172 197
Equity 529 571 595 643
B. INCOME STATEMENT
1. Mark Up Earned 76 111 100 68
2. Mark Up Expensed (4) (7) (5) (5)
3. Non Mark Up Income 10 26 11 29
Total Income 81 130 106 92
4. Non-Mark Up Expenses (117) (156) (153) (233)
5. Provisions/Write offs/Reversals (5) 0 0 6
Pre-Tax Profit (41) (26) (47) (135)
6. Taxes (1) 3 (2) (62)
Profit After Tax (42) (23) (49) (196)
C. RATIO ANALYSIS
1. PERFORMANCE
a. Non-Mark Up Expenses / Total Income 143.7% 119.7% 144.4% 252.4%
b. ROE -10.2% -3.9% -7.9% -26.5%
2. CREDIT RISK
a. Gross Finances (Total Finance-net + Non-Performing Advances + Non-Performing Debt Instruments) / Funding 870.2% 670.2% 526.9% 385.5%
b. Accumulated Provisions / Non-Performing Advances N/A N/A N/A N/A
3. FUNDING & LIQUIDITY
a. Liquid Assets / Funding 179.1% 354.4% 330.2% 290.7%
b. Borrowings from Banks and Other Financial Instituties / Funding 0.0% 0.0% 0.0% 0.0%
4. MARKET RISK
a. Investments / Equity 2.2% 1.5% 20.2% 8.8%
b. (Equity Investments + Related Party) / Equity 2.2% 1.5% 1.0% 0.0%
5. CAPITALIZATION
a. Equity / Total Assets (D+E+F) 76.8% 78.6% 77.6% 76.6%
b. Capital formation rate (Profit After Tax + Cash Dividend ) / Equity -9.8% -3.9% -7.6% -23.4%

Sep-25

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Escorts Investment Bank Limited

rating scale

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Sep-25

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Escorts Investment Bank Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
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    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
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    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
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  5. Monitoring and Review
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    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
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  6. Probability of Default
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Sep-25

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