PACRA Maintains Entity Ratings of First Fidelity Leasing Modaraba
The ratings reflect adequate financial profile of FFLM supported by its Debt free structure. However, subsequent benefits have been limited due to deteriorated asset structure. FFLM’s financing book is deteriorating due to non-availability of funds. FFLM's significant portion invested in non-earning/ illiquid assets (96% at end-Mar17) mainly less liquid investment property - Enplan - and Murree villas. Also, sizeable net non-performing advances of PKR 357mln in 9MFY17. This, while exhibiting weak earning profile and limited resources available to the Modaraba, kept the Modaraba’s performance under pressure and resulting a (loss for the periods, 9MFY17: 4mln; 9MFY16:11mln). Although the management is making continuous and rigorous efforts to liquidate its exposure in "Enplan". Persistent delays constrained the performance and growth of the Modaraba. Also management is unsuccessful to get NPL recoveries during 9MFY17.
The ratings are dependent on the management's ability to envisage a business plan for the Modaraba. This strategy, at minimum, should help overcome continuing losses. Timely liquidation of investment in "Enplan" and “Murree Villas”is important to bring viability to the Modaraba. The management is positive about it. Any significant decline in its value, resulting in erosion in equity, would have negative implications for the ratings. Meanwhile, any debt acquisition should be considered carefully.
First Fidelity Leasing Modaraba (FFLM) is a perpetual, multipurpose Modaraba founded in 1991, engaged in Islamic mode of leasing and term financing under morabaha. Additionally, the Modaraba has developed a portfolio of investment properties, both land and building. Modaraba’ s assets also include membership of Pakistan Stock Exchange (PSX) and Pakistan Mercantile Exchange Limited (PMEX). Fidelity Capital Management (Private) Limited (FCML) is the management company of FFLM. FCML is majority owned by Mughals Imperial (Pvt.) Ltd and two individuals (60%), whereas Chief Executive Officer Mr. Wasim-ul-Haq Osmani (18%) of the Modaraba and his associates (22%) owned the rest of the share. FCML has 22% stake in the Modaraba (FFLM) while 67% is owned by general public.