PACRA Downgrades the Entity Ratings of KASB Modarba

The ratings reflect KASBM's adequate financial profile emanating from low-leveraged capital structure, depicting maturing COM’s. The Modaraba starts making losses. In FY16, SECP restricted KASBM from raising new CoMs. This decision is subject to reconsideration depending on the performance of the Modaraba in FY17 but still pending with SECP. Owing to this restriction, KASBM has experienced contraction in its COMs (9MFY18: PKR 56mln; FY17: PKR 100mln; FY16: PKR 425mln). Although, KASBM has met all the maturities of COM’s. The Modaraba witnessed squeeze in its assets, with a consequent impact on performance of the Modaraba. Liquidity is being managed. However, KASBM's ability to recover from losses would be important. During the year, Modaraba charged provisioning against the doubtful receivables which ultimately impact the bottom line. To meet the funding challenge though, the management is also controlling its cost structure within bound. The management has managed the deposit maturities successfully and remained compliant despite the liquidity constraints being faced by the Modaraba. Modaraba's more focus is towards more funding lines from banks and search for new businesses for Modaraba to survive.

The ratings are dependent on the KASBM's ability to maintain its asset quality and improve its profitability. Vigilance in liquidity management remains important. Taking new funding lines and tapping new stable revenue stream 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). Modaraba’s management company is KASB Invest (Private) Limited (KIPL). KIPL is majorly owned by Mr. Muzaffar Ali Shah Bukhari holding 85.71% shareholding of the Company.

BOD of KIPL comprises four members including the CEO of KASB Modaraba. Mr. Muzaffar Ali Shah Bukhari is the chairman of the board, Audit and HRR Committees are the two sub-committees of the Board, 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.