The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Asset Manager Rating of 786 Investments Limited

Rating Type Asset Manager
(23-Dec-22 )
(24-Dec-21 )
Action Maintain Maintain
AM Rating AM3 AM3
Outlook Stable Stable
Rating Watch - -

786 Investment Limited ("786IL" or the "Company") reflects the modest positioning in the competitive asset management industry. 786IL is a small Asset Management Company. The AUMs of the Company decreased by ~25% to ~PKR 643mln at the end Sep'22 (SPLY: ~PKR 870mln). However, the market share declined to 0.06% from 0.1% at end-Sep’22 as the market grew at a faster rate in comparison. The Company has only one Fund, namely, 786 Smart Fund, which falls under Shariah compliant Income category. The Fund performance has been improved as the return of the Fund outperformed industry average and its benchmark. The rating also incorporates the Company's good governance framework, experienced management team and adequate organizational structure.
The management fee of the Company increased by 44% to PKR 13mln at the end of Jun'22 (Jun'21: PKR 9mln). The profit of the company decreased to PKR ~1mln in Jun'22 (Jun'21: PKR ~3.2mln). The profitability has been decreased on the back of unrealized loss on revaluation of investments. While the equity of the company stood at PKR ~231mln at end Jun'22 (Jun'21: PKR ~230mln). Strong sponsor commitment is considered positive for the rating.
The rating is dependent on materialization of strategy to enhance AUM's and market position of the Company. Meanwhile, maintaining strong fund performance and diversifying fund slate is important. Upholding high governance standards and strengthening of risk management is crucial for the rating.

About the Entity
786 Investments Limited is a public listed company. incorporated in Pakistan. The Company is registered as NBFC under the NBFC Rules,2003. The Company has the license to carry out Asset Management Services along with the license of Investment Advisory Services under the NBFC Rules, 2003, and NBFC Regulations, 2008. The Company was founded in 1990 and commenced business operations of Venture Capital Financing in 1993. Asian Development Bank (ADB) was its cofounding sponsor. In 1999, the Company was acquired by the First Dawood Group. Later, in 2002, First Dawood Group in partnership with Asian Development Bank, converted the Company's business operations to asset management. Then, in January 2017, the Company's name changed from Dawood Capital Management Limited to 786 Investments Limited to better reflect its focus on Islamic asset management. The Company's major shareholding vests with the First Dawood Group through First Dawood Investment Bank Limited (15%), Bank of Khyber (15%), B.R.R. Guardian Modaraba (~13%) and Miss Tara Uzra Dawood (~12%). The remaining shareholding of ~45% is held by other individuals and corporate entities. The Company's Board of Directors currently comprises seven board members out of which, four are independent and two are non-executive. The board members have strong educational backgrounds and carry extensive experience. The Chairperson, Mr. Ahmed Salman Munir, possessing more than 30 years of professional experience in banking industry. The AUMs of the company stood at PKR 643mln in the end Sep'22

About the Instrument

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.