The Pakistan Credit Rating Agency Limited
20-Sep-22
Analyst
Behrooz Fareed
behrooz.fareed@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Correlation Between Long-term & Short-term Rating Scales | Jun-22
- Methodology | Rating Modifiers | Jun-22
- Methodology | Non-Banking Finance Companies Rating | Jun-22
Related Research
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PACRA Maintains Entity Ratings of First Punjab Modaraba
| Rating Type | Entity | |
|
Current (20-Sep-22 ) |
Previous (24-Sep-21 ) |
|
| Action | Maintain | Maintain |
| Long Term | A- | A- |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect the strong patronage of the Modaraba; The Bank of Punjab (BoP) (Rated AA+ by PACRA). The topline increased on account of increase in interest rates and improved business profile. However, the impact of said incline was in turn subsided by considerable increase in finance costs. In way of better profitability, recovery of NPLs also helped. 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 plan is at an advanced stage. 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 business. A comprehensive business plan is under development, which shall be approved by BoP’s board. The management’s efforts to sustain and ultimately improve its business profile 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.
About
the Entity
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 subsidiary 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 along with two independent members. Mr. Aamir Malik, CEO of Modaraba, has over 31 years of banking experience in different management positions, is supported by an adequate management team.