The Pakistan Credit Rating Agency Limited
30-Dec-16
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Rating Modifiers | Outlook and Rating Watch | Jun-16
- Correlation between Long-term and Short-term rating | Jun-16
- Methodology | Non-Banking Finance Companies | Jan-16
Related Research
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PACRA Maintains Entity Ratings of First Habib Modaraba
| Rating Type | Entity | |
|
Current (30-Dec-16 ) |
Previous (07-Jan-16 ) |
|
| Action | Maintain | Maintain |
| Long Term | AA+ | AA+ |
| Short Term | A1+ | A1+ |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect FHM’s robust financial profile emanating from healthy asset base, sound asset quality, and its sustained profitability. During FY16, the modaraba witnessed squeezed spreads from its financing operations; however, it managed to sail through its devised strategy to beef-up its business volumes to maintain its bottom-line performance. Capital structure is moderately leveraged. However, funding mix is adequately diversified. Going forward, the management, while continuing with its growth strategy, intends to expand its outreach to other areas of the country, especially those close to CPEC related projects. The ratings take into account good management quality and strong control environment.
The proposed bill of amendments in Modaraba ordinance 1980 (Clause 8B) is not allowing Modarbas to issue new COMs. Modarba Association is in discussion with the regulator on this issue and is very much hopeful for a positive outcome.
The ratings are dependent on the management's ability to sustain its competitive positioning while ensuring stable profitability.
About
the Entity
First Habib Modaraba, established in 1985 and listed on Pakistan Stock Exchange, is a perpetual, multi-purpose Modaraba engaged in Islamic modes of financing, mainly Diminishing Musharka. Currently, FHM is managed by Habib Modaraba Management Company (Pvt.) Limited (HMCL). In a recent development, an ownership restructuring is underway. Whereby, while FHM's association with the House of Habib would remain intact, Habib Metropolitan Modaraba Management Company (Pvt.) Limited (HMMML) (wholly owned subsidiary of Habib Metropolitan Bank) will be the new management company of FHM. HMMML will hold 10% stake in Modaraba, while the remaining shareholding will be the same.
FHM has a six - member board of directors. Except MD, all board members are non-executive. Board members have a vast experience of banking and finance. The MD, Mr. Muhammad Shoaib, has been associated with the Modaraba since its inception. The management team consists of seasoned professionals who have been associated with the Modaraba for a long period.