PACRA assigns Preliminary rating to Abhi (Pvt.) Limited | PPSTS | PKR 2bln | TBI

Abhi (Pvt.) Limited (the "Company") has emerged into the country's fintech space with a financial wellness platform for individuals and companies. Abhi has raised ~$21mln from renowned venture capital funds and the co-founder's own investment. The product line of Abhi includes invoice factoring, which is currently a prime revenue earner, along with EWA and payroll financing products. Further, Abhi only allows the EWA facility to employees of pre-qualified customers, and concentration risk has been addressed through having a cap of 5% of net equity and sub-ordinated debt for cumulative exposure of all product lines to a single customer. Abhi's total credit exposure stood at ~PKR 4,607mln at end-Jun'22, and going forward Abhi will ensure that the cap of single product-line exposure and sector exposure to 70% and 20% of net-equity and subordinated debt, respectively, is maintained. Further, total credit exposure will be kept under 2x of equity.
In order to manage the working capital needs, the Company is in the process of issuing a short term sukuk amounting PKR 2bln. The security structure of the Sukuk would be secured by way of i) charge/lien of collection account: The Company's customers deposit their repayments into the Faysal Bank Account. The Company shall issue irrevocable instructions to Faysal Bank to transfer funds equivalent to 1/6th of the Sukuk repayment amount from the Faysal Bank account, on a monthly basis to the Sukuk Payment Account (SPA) maintained with the Faysal Bank ii) lien marked on and a right of set-off, on SPA iii) registered lien in favor of the trustee, over short-term liquid investments amounting to PKR 1bln (in NBP Islamic Income Fund and at Habib Metropolitan Bank amounting PKR 500each), these funds would be earmarked in favor of Debt Service Repayment Accounts maintained with the Habib Metro Bank and NBP Islamic Income Fund, until maturity for the benefit of the investors iv) hypothecation over the present and future receivables of Abhi (Pvt) Limited would be created in favor of the trustee and iv) Fifty percent (50%) of the issue size shall be available for deployment from the day of the issue, while remaining 50% shall be placed in a Bank(s) or money market fund(s) rated AAA or AA+. The remaining 50% would be gradually available for deployment, in proportion to the retention of funds in the DPA. Proportionate to the amount held in DPA, an equivalent amount from the cash fund can be utilized for deployment in business.

About the Entity
Abhi (Pvt.) Limited is a fintech startup with an NBFC license incorporated under the Companies Act, 2017 on April 20, 2021.The Company is 99.99% owned by Abhi Fintech Limited, which in turn is 100% owned by Abhi Limited. Abhi Limited is primarily owned by the co-founders - Mr. Omair Ansari (20.21%) and Mr. Ali Ladhubhai (19.33%) while the remaining shares are owned by renowned VCs.

About the Instrument
Abhi (Pvt.) Limited is in the process of issuing rated, secured, privately placed, short term Sukuk up to PKR 2bln (Inclusive of PKR 1bln GSO) in May23, to finance the Company’s working capital requirements. The tenor of PPSTS would be 6 months and will carry a profit rate of 6MK+(250bps - 300bps). Profit and principal will be realized at the time of maturity.