PACRA Maintains Entity Ratings of First Fidelity Leasing Modaraba
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 although majority of them are covered. This exhibits weak earning profile and limited resources available to the Modaraba. 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 Jun19. As per previous history, all cash is paid as dividend as per applicable laws. Modaraba is yet to develop a sustainable business model. A change in the ownership structure is envisaged, which may ultimately impact its future strategy.
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.
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.