PACRA Maintains Entity Ratings of First Punjab Modaraba
The ratings reflect the strong patronage of the Modaraba ; The Bank of Punjab (Rated AA). The Modaraba has witnessed enhanced performance in topline growth, however, increase in finance cost curbed the effect of improved topline. In order to mitigate the effect of accumulated losses, First Punjab Modaraba (FPM) intends to enhance its equity base through further injection of equity from the sponsor. The company has managed to sustain its earning assets, mainly lending book wherein vehicle financing contributed majorly. The key sponsor is committed for its support in the form of a sustainable funding base. The management is in the process of generating new avenues of funding. The lending stagnated during COVID-19, as transportation sector, a niche of FPM, was severely impacted. Post June, transportation sector has picked up the pace, leading to improved outlook. The management’s efforts to sustain and ultimately improve its financing book is expected to yield sustainable results; however, materialization is contingent upon the timely implementation. Support from sponsor is vital.
The ratings are dependent on relative positioning of the Modaraba in the sector and sustained asset quality of the new portfolio: achieving bottom line profitability is important. Meanwhile, any weakening in the financial profile or support from the sponsor could have negative implications.
First Punjab Modaraba (FPM), established in 1992, is a perpetual, multipurpose Modaraba, is listed on Pakistan Stock Exchange. Modaraba is engaged in financing through Ijarah, Morabaha and Diminishing Musharaka. Punjab Modaraba Services (Pvt.) Limited (PMSL), the wholly owned subsidary of The Bank of Punjab (BoP), is the management company of FPM. PMSL has ~39% stake in the modaraba.
The Board of Directors comprises of seven members including CEO of FPM. Majority represent the Bank of Punjab alongwith two independent members.Mr Aamir Malik, CEO of Modaraba, has over 27 years of banking experience in different management positions, is supported by an adequate management team.