The Pakistan Credit Rating Agency Limited
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Faraan Taimoor

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PACRA Maintains Entity Ratings of Modaraba Al Mali

Rating Type Entity
(26-Mar-21 )
(15-Apr-20 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Developing Stable
Rating Watch Yes Yes

Modaraba Al Mali, a subsidiary of Bank Islami Investments Limited (BIML), is a small sized player in the Modaraba Industry. The Modaraba enjoys patronage from its established sponsor, Bank Islami Pakistan Limited (BIPL). The formulation of a sustainable business plan had been a focal point of the Modaraba’s management, in absence of which, Modaraba Al Mali is lagging behind, in comparison to its peers. A buyer had been sought for a considerable time period by the sponsors. This has borne fruit; a prominent business group has received the regulator’s approval for the acquisition of the company. The approval with the Competition Commission of Pakistan (CCP) is pending, this is expected to be achieved within a short span of time.

The ratings take comfort in the equity based capital structure of the entity, indicating a low financial risk profile. The entity’s financing book is mainly structured with Ijarah and Musharaka agreements, with assets quality being maintained, resulting in NPL’s being fully provided (Loan Loss Provisions / Impaired Lending: 100%). The Modaraba is supplementing its revenue stream through renting out the available extra space from its office premises.
The ratings are dependent on the sustained risk profile. Development of new business strategy along-with its implementation would be important. Enhancement of asset base and equity-based capital structure is important. The entity has been put on rating watch, in lieu of the impending takeover by the new sponsors.

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. Bank Islami Modaraba Investments Limited (BIML) – wholly owned subsidiary of Bank Islami 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.