PACRA Downgrades the Ratings of Escorts Investment Bank Limited

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.
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.

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.