PACRA Maintains Entity Ratings of KASB Modarba

The ratings reflect KASBM's adequate financial profile emanating from low-leveraged capital structure and reasonable diversity in the income stream. The Modaraba continues to remain profitable, albeit miniscule. In FY16, SECP restricted KASBM from raising new CoMs. This decision is subject to reconsideration depending on the performance of the Modaraba in FY17. Owing to this restriction, KASBM has experienced contraction in its COMs. The Modaraba witnessed squeeze in its assets, with a consequent impact on performance of the Modaraba. Liquidity is being well managed. However, the management's ability to establish a stable and continuous non-deposit funding stream would be demonstrated over a longer horizon. Moreover, good asset quality provides comfort. To meet the funding challenge though, the management is also controlling its cost structure within bound. Moreover, the management intends to follow cautious growth stance with continued focus on asset quality. Diminishing Musharaka and agri based business are likely growth drivers for future.

The ratings are dependent on the management's ability to arrest the declining trend, indeed restore its profitability level. Vigilance in liquidity management remains important. Meanwhile, tapping new stable avenues of funding to improve business profile is important.

About the Entity
KASB Modaraba (KASBM) established in 1990, is a perpetual, multipurpose Modaraba with a network of 1 head office and 3 branches. The Modaraba, listed on Pakistan Stock Exchange is primarily engaged in financing through Ijarah, Morabaha, Musharaka, Diminishing Musharaka and Modaraba. Modarba’s management company is KASB Invest (Private) Limited (KIPL). KIPL is majorly owned by Mr. Muzaffar Ali Shah Bukhari (43%) and Mr. Mahmood Ali Shah Bukhari (43%). KIPL has 50% stake in the Modaraba while BankIslami Pakistan Limited owns 22% and Sulaiman Ahmed Al-Hoqani has 16% stake in KASBM. BoD of KIPL comprises four members including the CEO of KASB Modaraba. Syed Waseem ul Haq Haqqie, is the chairman of the board, a senior chartered accountant by profession. Audit and HR Committees are the two sub-committees, chaired by Mr. Farrukh Ansari (an independent director). Aftab Afroz Mahmoodi is the CEO. He has over all 32 years of experience with 22 years in the financial sector. He is supported by a Competent and experienced management team.