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The Pakistan Credit Rating Agency Limited
Press Release

Date
22-Sep-17

Analyst
Saliha Sajid
saliha.sajid@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of First Fidelity Leasing Modaraba

Rating Type Entity
Current
(22-Sep-17)
Previous
(22-Mar-17)
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

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.

About the Entity
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.

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.