PACRA Maintains Entity Ratings of First Habib Modaraba

First Habib Modaraba's ('the Modaraba') assigned ratings reflect its sound asset quality supported by prudent risk management, strong business and financial profile, and a streamlined governance framework. Additional comfort is derived from the Modaraba’s affiliation with a renowned sponsoring entity, Habib Metropolitan Bank Ltd. The presence of industry veterans in the management structure, along with the implementation of a robust internal control system, is considered pivotal for the Modaraba's operational efficiency. The Modaraba continues to lead the market and has demonstrated a prudent growth strategy by offering a diversified portfolio of Shariah-compliant products, which primarily includes Diminishing Musharakah. The primary focus remains on vehicles and plant & machinery financing. Despite a reduction in the policy rates, the Modaraba’s topline gathered support through a strategy revamp with an increase in the business volumes. The Modaraba targets low-risk clients, supported by a comprehensive risk management framework. Moreover, exploring digital lending opportunities to enhance its outreach and operational efficiency, along with continued strategic initiatives to expand into new sectors, has further strengthened the overall outlook. The Modaraba continues to maintain robust profitability. Its funding strategy remains anchored in Musharakah-based Certificates of Investment (CoIs), offered in tenors of 3 months, 6 months, and 1 year. This, along with substantial credit lines through shariah compliant financing from different Islamic banks/windows, reflects confidence in the Modaraba's financial strength. Growth in the funding base has strengthened the liquidity profile. Maintaining a Capital Adequacy Ratio (CAR) of ~20% depicts strong capital buffers. The Modaraba is evolving its long-term strategic vision to remain competitive in the increasingly challenging financial landscape. Moroever, sustaining the highest ratings among the entire Modaraba sector across the country bodes well.
The ratings are contingent upon the management’s continued ability to maintain the Modaraba’s competitive position while delivering consistent profitability. They also rely on the preservation of a stable financial profile. Any material shift in the risk profile could negatively affect the ratings.

About the Entity
First Habib Modaraba ('the Modaraba'), established in 1985 and listed on the Pakistan Stock Exchange, is a perpetual, multi-purpose Modaraba engaged in Islamic modes of financing, mainly Diminishing Musharaka. Habib Metropolitan Modaraba Management Company (Pvt.) Limited, is a wholly owned subsidiary of Habib Metropolitan Bank and is the management company of the Modaraba. The Modaraba Management Company holds ~10% stake in the Modaraba as controlling stake. The Board is chaired by Mr. M. Shams Izhar, possessing professional experience of over 36 years. All the Board members have vast experience in banking and finance. The CEO, Mr. Muhammad Shoaib Ibrahim has been associated with the Modaraba since its inception. He is supported by experienced team members.