The Pakistan Credit Rating Agency Limited
25-Sep-20
Analyst
Faraan Taimoor
faraan.taimoor@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | NBFC | Jun-20
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-20
- Criteria | Ratings Transition | Jun-20
Related Research
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PACRA Maintains Entity Ratings of First Fidelity Leasing Modaraba
| Rating Type | Entity | |
|
Current (25-Sep-20 ) |
Previous (27-Sep-19 ) |
|
| Action | Maintain | Maintain |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect adequate financial profile of First Fidelity Leasing Modaraba (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 i.e. investment property - Enplan. The company has been able to settle majority of its non performing advances. FFLM has an earning book mainly deployed in a portfolio of machinery and vehicles. Meanwhile, the management is making continuous and rigorous efforts to liquidate its exposure in "Enplan"; it expects amicable resolution. Concerns regarding another illiquid investment property - Murree Villas, are further expected to be resolved. The company is yet to develop a sustainable business model although the risk free structure provides comfort to the rating. Governance structure needs to be enhanced.
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.