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
(23-Sep-22 )
(23-Sep-21 )
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 a healthy asset base, sound asset quality, and improved profitability. FMH documented robust performance for FY 2021-22, which was one of the best years in the operational history of FHM in terms of profitability and overall business growth. Additional comfort is derived from the Modaraba’s affiliation with a renowned sponsor entity (Habib Metropolitan Bank). The presence of industry veterans in the management structure, along with the implementation of a robust internal control system, is considered pivotal in the operational efficiency of the Modaraba. Liquidity is being well maintained by investing in term deposits. FHM managed to sail through its devised strategy to beef up its business volumes to maintain its bottom-line performance by maintaining its asset quality. 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 portrays Modaraba's strong capital position. Moreover, new tax regulations will potentially aid Modarabas to furnish their equity base. Going forward, the management, while continuing with its growth strategy, intends to diversify its revenue streams through a diversified product portfolio and different business models. The Modaraba is evolving its long-term strategic vision to remain competitive in the increasingly complex financial landscape.
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 consists of six members. All board members are non-executive except the CEO. All board members have a vast experience in banking and finance. The CEO, Mr. Muhammad Shoaib Ibrahim 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.