Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of PAIR Investment Company Limited
Rating Type | Entity | |
Current (13-Jun-18 ) |
Previous (18-Dec-17 ) |
|
Action | Maintain | Maintain |
Long Term | AA | AA |
Short Term | A1+ | A1+ |
Outlook | Stable | Stable |
Rating Watch | - | - |
Development Financial institutions (DFIs) largely operate on turf common to commercial banks. Limited depth in participation towards development of long gestation projects, low funding base, and high competition become their key challenges.
Joint Venture Financial Institutions are DFIs jointly conceived by the two sovereigns with primary objective of identifying and nurturing multiple development initiatives. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite.
The ratings assigned takes into account PAIR's ability to sustain its lending portfolio, both in volumes and quality. Management has created an adequate mix of sectors in advances, though client concentration remains high. The capital and treasury division actively manages a portfolio of investments comprising Government securities, Equities, Sukuk & TFCs and funds. During the year, investment book declined; however provides comfortable cushion to the liquidity. Borrowing from financial institution remains the primary source of funding, while management’s attention is required for enhancing the deposit base. Liquidity position and capitalization indicators remained stable. Going forward, PAIR is focusing on strengthening the credit portfolio by tapping new customers. Management is cognizant of the fact that they need to find new niche for growth and development, hence new avenues like SME segment, are being explored.
The ratings are dependent on the company’s ability to sustain its financial profile while managing the associated risks as advances decrease. The concentration level in funding and advances needs to be pro-actively managed. Consistent efforts by the management to add further diversity to their portfolio and at the same time stability at CEO's position remains critical for the ratings.
About
the Entity
PAIR Investment Company Limited (PAIR) was incorporated in January 2007. The company is a joint venture between Pakistan and Iran, having equal ownership stake. The Ministry of Finance (MoF) manages the ownership interests of the Government of Pakistan, while Iran Foreign Investment Company (IFIC) represents the Government of Iran. PAIR's business activities can be divided into fund based and non-fund based.