The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Pakistan Kuwait Investment Company (Pvt.) Limited

Rating Type Entity
Action Maintain Maintain
Long Term AAA AAA
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 benefit from the company's strong financial profile emanating from robust risk absorption capacity and sound liquidity. Despite increasing credit offtake in the country, PKIC’s lending book did not expand much following a prudent lending and risk management approach. The management is cognizant of the opportunities and is contemplating an appropriate strategy. Nonetheless, the build-up of strategic equity investments in different companies provides a strong and stable income stream in the shape of dividends; hence, comforting the net profits. The company has focused on treasury operations where it is enhancing its participation in money market. The liquidity profile of the institution remains comfortable with access to financial institutions to support its treasury and lending operations. Going forward, the management, while continuing to prudently increase its advances book, would focus on non-fund based revenue stream.

The ratings are dependent on the management's ability to sustain its financial profile while managing the associated risks. Management’s efforts to diversify its operations, finding a new niche for growth, while sustaining its profitability would remain critical.

About the Entity
Pakistan Kuwait Investment Company (Private) Limited was established in March 1979 as a joint venture between the Governments of Pakistan and Kuwait. It is equally owned by Government of Pakistan through the State Bank of Pakistan (SBP) and Government of Kuwait through Kuwait Investment Authority (KIA), representing their respective governments. The governments of Kuwait and Pakistan have been rated “Aa2” and “B3” respectively, with a stable outlook, by Moody’s in 2018, representing relative stable financial strength of the sponsors. PKIC's operations showed an increased focus towards money markets keeping its core functions intact. It has developed a good and diversified portfolio of strategic investments.

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.