The Pakistan Credit Rating Agency Limited
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Saliha Sajid

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PACRA Maintains Entity Ratings of First Habib Modaraba

Rating Type Entity
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect FHM’s robust financial profile stemming from healthy asset base, sound asset quality and sustained profitability. The asset yield has declined; FHM has managed to cushion its impact by rationalizing cost of funding- hence very nominal dilution in spreads. FHM managed to sail through its devised strategy to beef-up its business volumes to maintain its bottom-line performance. Capital structure is moderately leveraged. FHM’s capital provide strong support to the funding structure of the Modaraba, equally aided by COM’s. 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 ratings are dependent on the management's ability to sustain its competitive positioning while ensuring stable profitability. The ratings also depend upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.

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 Musharaka. In a recent development, an ownership restructuring is completed. Habib Metropolitan Modaraba Management Company (Pvt.) Limited (HMMML) (wholly owned subsidiary of Habib Metropolitan Bank) is a new management company of FHM. HMMML hold 10% stake in Modaraba, while the remaining shareholding is same.
FHM has a five members Board. One position is currently vacant. Except MD, all board members are non-executive. Except MD, all board members are non-executive. Board members have a vast experience of banking and finance. The MD, Mr. Muhammad Shoaib Ibrahim, has been associated with the Modaraba since its inception. He is assisted by an able 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.