PACRA Maintains Entity Ratings of First Punjab Modaraba

First Punjab Modaraba ('the Modaraba') ratings reflect its association with The Bank of Punjab (BoP) (Rated AA+ by PACRA). The Modaraba's earning assets, particularly in the lending sector, mainly focus on vehicle financing. Income levels are suppressed. Moreover, the declining interest rate trajectory may further impact the Modaraba's income-generating ability. Overall, the growth remains sluggish, with core income performance deteriorating due to high finance costs. The accumulation of losses remains a pressing concern impacting the equity base of the Modaraba, which currently stands at PKR 145mln as of Mar-25 (as of Dec-24: PKR 208mln). The sponsor - Bank of Punjab (BoP) - provided long-term redeemable capital of PKR 1.5bln, along with an injection of a subordinated loan of PKR 500mln in CY24. The sponsor has injected PKR 2 billion as a subordinated loan, which will be reflected on the Modaraba’s balance sheet as of June 2025. This was expected to improve the overall liquidity and enhance the business generation capacity. However, challenges in maintaining a healthy equity position persist. Lately, a structural change in the management of the Modarba has been observed. A comprehensive business plan, approved by the Modaraba's Board, is in process. The sponsor would revitalize their commitment with Modaraba; thus, leveraging the support, the Modaraba can revamp its otherwise weak financial and business profile. The ongoing challenges require vigilance.
The ratings are dependent on the relative positioning of the Modaraba in the sector and the sustained asset quality of the new portfolio: achieving bottom-line profitability is important. Meanwhile, any weakening in the financial profile or support from the sponsor could have negative implications.

About the Entity
First Punjab Modaraba ('the Modaraba'), established in 1992, is a perpetual and multidimensional Modaraba listed on the Pakistan Stock Exchange. The Modaraba is engaged in financing through Ijarah, Morabaha, and Diminishing Musharaka. Punjab Modaraba Services (Pvt.) Limited, a wholly owned subsidiary of The Bank of Punjab (BoP), is the Management Company of the Modaraba and holds a stake of ~39% stake in the Modaraba. General Public holds a stake of ~ 40%. While the remaining ~21% is held by financial institutions. Mr. Ijaz Ul Rehman has been lately nominated as the Board's Chairman. While, Mr. Asim Jahangeer Seth has been lately appointed as the CEO of the Modaraba. They are supported by a well equipped management team.