The Pakistan Credit Rating Agency Limited
27-Sep-19
Analyst
Muhammad Obaid
muhammad.obaid@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- PACRA_Methodology_NBFC | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
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PACRA Maintains Entity Ratings of First Fidelity Leasing Modaraba
| Rating Type | Entity | |
|
Current (27-Sep-19 ) |
Previous (29-Mar-19 ) |
|
| 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 as significant portion of the asset structure is invested in non-earning/ illiquid assets mainly less liquid investment property - Enplan. Also, sizeable net non-performing advances are there, although majority of them are covered. This exhibits weak earning profile and limited resources available to the Modaraba. FFLM has earning book deployed in a portfoli of machinery and vehicles. Meanwhile, the management is making continuous and rigorous efforts to liquidate its exposure in "Enplan". Persistent delays constrained the performance and growth of the Modaraba. There is another property lying on the balance sheet - Murree Villas. FFLM has contracted to sell this property; full cash payment is expected to be received by end of FY20. As per previous history, all cash is paid as dividend as per applicable laws. Modaraba is yet to develop a sustainable business model.
The ratings are dependent on the management's ability to envisage a business plan for the Modaraba. Timely liquidation of investment in "Enplan" is important to bring viability to the Modaraba. The management is making continuous efforts. 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 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 of the Modaraba Mr. Wasim-ul-Haq Osmani (18%) 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.