The Pakistan Credit Rating Agency Limited
20-Sep-23
Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Correlation Between Long-term & Short-term Rating Scales | Jul-23
- Methodology | Non-Banking Finance Companies Rating | Jun-23
- Methodology | Rating Modifiers | Apr-23
Related Research
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PACRA Maintains Entity Ratings of First Punjab Modaraba
| Rating Type | Entity | |
|
Current (20-Sep-23 ) |
Previous (20-Sep-22 ) |
|
| Action | Maintain | Maintain |
| Long Term | A- | A- |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect the Modaraba's association with The Bank of Punjab (BoP) (Rated AA+ by PACRA). Income level has improved supported by high interest rates; however, overall growth is consistently deteriorating due to high finance cost. The Modaraba upholds its earning assets, particularly in the lending sector with a significant focus on vehicle financing. However, the impact of accumulated losses remains a pressing concern, necessitating ongoing efforts to strengthen the equity base, currently stands at PKR 1.2mln as of Mar-23 (as of Dec-22 : PKR 0.05mln), through an additional investment. Through a support letter, BoP has shared a formal commitment to provide subordinated loan of PKR 500mln. The plan is expected to be implemented within due time. Going forward, a comprehensive plan for the Modaraba to tap into new products is under development, and is expected to be shared and approved by BoP’s Board in near future. Yet the modalities and materialization of the plan remains unclear. Support from sponsor is vital. Considerably weak financial position and the ongoing economic challenges requires vigilance.
The ratings are dependent on relative positioning of the Modaraba in the sector and 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 a multi-diensional Modaraba, is listed on 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. The Board of Directors is chaired by Nadeem Amir, while Mr. Aamir Malik head the Modaraba as the CEO. He is supported by an adequate management team.