The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Positive Outlook to Entity Ratings of Pak-Libya Holding Company (Pvt.) Limited

Rating Type Entity
(25-Jun-21 )
(25-Jun-20 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Positive Stable
Rating Watch - Yes

JVFIs are largely engaged in providing credit lines on turf common to commercial banks. However, limited growth in advances, over last many years, is evident of conservative risk appetite of these institutions. Key reliance on treasury function funded through borrowings from money market. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite. Positive Outlook reflects improved performance of the institution; net markup income has seen significant improvement, during CY20, reported at PKR 713mln (CY19: PKR 77mln). This is mainly attributable to enhanced income stream from investments like trading in Govt. securities, specifically investing in PIBs; enhanced tactical allocation in accordance with current market conditions. Non markup income comprising of significant capital gains booked has boosted the bottom-line, turning it positive (CY20: PKR 304mln) as compared to losses being recorded in the consecutive previous periods. Funding base majorly comprises borrowings from financial institutions. Deposits comprising COIs have witnessed significant increase during the year. Another critical milestone is achieved regarding Kamoke Energy Limited (KEL), largest non-return generating asset, wherein management is all set in making it a performing asset via an engagement with another player in the market. There had been another challenge regarding non-compliance of MCR. Pak Libya has received full amount of last tranche in 1QCY21 from Ministry of Finance (MoF). Subsequent to full payment by Ministry of Finance (MoF), the Company’s paid-up capital (net of losses) rose to PKR 6.1bln to meet MCR requirements. The company’s capital adequacy witnessed increase YoY (CY20: 24.7%, CY19: 18.2%). COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures taken by the regulators and other concerned bodies have mitigated the potential damages much anticipated from this pandemic. Vigilance is required as the loan repayment cycle resumes as variants of the pandemic continue to re-emerge.
Consistent efforts by the management to stabilize revenue stream and attain sustained profit stream from diversified operations remain vital. Meanwhile, sustaining asset quality is also essential for the ratings.

About the Entity
Pak Libya Holding Company (Pvt.) Limited (Pak Libya) was established as a joint stock company in October 1978. The Company is equally owned by the Government of Islamic Republic of Pakistan, represented through State Bank of Pakistan (SBP) and Ministry of Finance (MoF), and the Government of Libya, represented through Libyan Foreign Investment Company (LAFICO). The overall control vests with six-member board of directors including MD/CEO, DMD and four non-executive directors having equal representation from both governments. Company’s MD/CEO, Mr. Khurram Hussain carries financial sector experience of almost 30 years.

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.