The Pakistan Credit Rating Agency Limited
02-Apr-19
Analyst
Muhammad Noor Ul Haq
noorulhaq@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | NBFC | Jun18 | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA
PACRA Revises Entity Ratings of Modaraba Al-Mali
| Rating Type | Entity | |
|
Current (02-Apr-19 ) |
Previous (22-Nov-18 ) |
|
| Action | Downgrade | Maintain |
| Long Term | BBB+ | A- |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
Modaraba over the years has been trying to build a sustainable business model. With different
attempts, the outcome is not yet materialized. There is recent change at the top level; the incumbent CEO is developing a business plan, which with the auspices of the board, will be implemented. The success of this plan is important. The relative operating environment has grown significantly. MAM has lagged in the relative peer universe having similar rating characteristics. The ratings draw comfort basically from the association of the Modaraba with Bankislami, via management Company (Bank Islami Modaraba Investment Limited). The ratings of Modaraba is reflective of its equity-based capital structure. Its financing book mainly comprises of Ijarah and Musharaka. Although the asset quality is fully maintained, as NPL’s are fully provided (Loan Loss Provisions / Impaired Lending: 100%). The Modaraba is planning to raise its income stream through renting out the available extra space from its office premises. The management would maintain largely equity-based capital structure; however, borrowing from the management company/sponsor bank would be an option available to the Modaraba.
The ratings are dependent on the management's ability to formulate a viable business plan and execute the business strategy to establish the modaraba on its footing. Maintaining healthy asset quality and its equity-based capital structure is important.
About
the Entity
Modaraba Al-Mali (MAM), incorporated in 1987, is a small-sized and perpetual multi-purpose Modaraba listed on Pakistan Stock Exchange, with its head office in Karachi. BankIslami Modaraba Investments Limited (BIML) – wholly owned subsidiary of BankIslami Pakistan Limited (BIPL) owns 13% equity of MAM, whereas other certificates are distributed among NBFCs, joint stock companies and individuals. BoD comprises eight members. Seven nominees are of BIPL and among them, there is one independent director. Mr Sadiq Sheikh- CEO of Modaraba Al Mali has four decades of diversified experience. He is supported by a qualified management team.