The Pakistan Credit Rating Agency Limited
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Saliha Sajid

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PACRA Upgrades Entity Rating of First Punjab Modaraba

Rating Type Entity
Action Upgrade Maintain
Long Term A- BBB+
Short Term A2 A2
Outlook Stable Positive
Rating Watch - -

The ratings of FPM incorporates rejuvenation reflected in the recent performance of the Modaraba. The Modaraba has witnessed improvement in its standalone business profile exhibited in its performance trend; achieving profitability is a key highlight over the last couple of quarters. The Modaraba managed to expand its earning assets, mainly lending book wherein vehicle financing contributed majorly. The key sponsor – The Bank of Punjab (BoP) – a bank majority owned by the Government of Punjab, continued its support in the form of a sustainable funding base, which the management expects to increase to fund envisaged growth plans. The Management is in the process of securing funding from alternative sources. Meanwhile, the management’s efforts resulted in a decline in delinquency ratio. Further recoveries, as planned, are likely to support Modaraba’s performance in the future. The management’s efforts in particular to build strong financing book are expected to yield sustainable results; however, materialization is contingent upon the timely implementation.

The ratings are depends on improved performance of the Modaraba. Sustainability in its operational performance, in turn, achieving bottom line profitability would be critical. Meanwhile, any weakening in the financial profile or support from the sponsor could have negative implications.

About the Entity
First Punjab Modaraba (FPM), established in 1992, is a perpetual, multipurpose Modaraba, is listed on Pakistan Stock Exchange. Modaraba is Engaged in financing through Ijarah, Morabaha and Diminishing Musharaka. Punjab Modaraba Services (Pvt.) Limited (PMSL), the wholly owned subsidary of The Bank of Punjab (BoP), is the management company of FPM. PMSL has ~39% stake in the modaraba. BoD comprises six members including CEO of FPM, among them, there is one independent director. Majority represents the Bank of Punjab. Mr. Khalid Tirmizey, the deputy CEO of BOP, is the chairman of the board, having over 41 years of experience working at several leading commercial banks in the country. Mr Aamir Malik, CEO of Modaraba, has over 24 years of banking experience in different management positions, is supported by a qualified management team.

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.