The Pakistan Credit Rating Agency Limited
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Muhammad Noor Ul Haq

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PACRA Maintains Entity Ratings of First Habib Modaraba

Rating Type Entity
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect First Habib Modaraba’s (FHM or the Modaraba) strong business profile, emanating from healthy asset base, sound asset quality and sustained profitability. Additional comfort is derived from the Modaraba’s affiliation with a renowned sponsor entity (Habib Metropolitan Bank). Presence of industry veterans in the management structure, along-with implementation of a robust internal control system, is considered pivotal in operational efficiency of the Modaraba. The historical performance trend speaks volumes about the distinct position FHM carries in the financial/non-financial modaraba universe. Post COVID, declining lending rates negatively impacted the topline, however, through addition of good quality financial assets and considerable financial charge reduction, the Modaraba secured a stable bottom-line for the period. FHM’s capital provides strong support to the funding structure of the Modaraba, equally aided by Certificates of Musharaka (CoM). The strong capital adequacy ratio portray the Modaraba's strong capital position, should adverse circumstances arise.
Going forward, the management intends to maintain its conservative growth strategy, as economic uncertainty is increasing due to resurgence of COVID. Further, withdrawal of tax exemptions under Finance Act, 2021, shall be a point of concern and may have negative repercussions prospectively.
The ratings remain dependent on the management's ability to sustain its competitive positioning, while ensuring stable profitability. The ratings also depend upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.

About the Entity
First Habib Modaraba, established in 1985 and listed on Pakistan Stock Exchange, is a perpetual, multi-purpose Modaraba engaged in Islamic modes of financing, mainly Diminishing Musharaka and Lease financing. Habib Metropolitan Modaraba Management Company (Pvt.) Limited (HMMML) (wholly owned subsidiary of Habib Metropolitan Bank) is the management company of FHM. HMMML hold 10% stake in Modaraba. The Habib Metropolitan Modaraba Management Company (Pvt.) Limited (HMMML) also owns Habib Metro Modaraba.
The board consist of six members. All board members are non-executive except the CEO. All board members have a vast experience of banking and finance. The CEO, Mr. Muhammad Shoaib Ibrahim, Chairman of NBFI and Modaraba Association has been associated with the Modaraba since its inception. He is supported by experienced team members.

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.