PACRA Maintains Entity Ratings of PAIR Investment Company Limited
Development Financial institutions (DFIs) largely operate on turf common to commercial banks. Limited depth in participation towards development of long gestation projects, low funding base, and high competition become their key challenges. Joint Venture Financial Institutions are DFIs jointly conceived by the two sovereigns with primary objective of identifying and nurturing multiple development initiatives. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite.
The ratings assigned takes into account PAIR's ability to sustain its lending portfolio, in volumes. The lending portfolio quality is deteriorated by addition of some major groups into ‘non-performing category ‘which impacted the overall performance. Management has created an adequate mix of sectors in advances. The capital and treasury division main focus of investment was Government securities, Equities, Sukuk & TFCs and funds. During the year, investment book declined; however provides comfortable cushion to the liquidity. Borrowing from financial institution remains the primary source of funding, while management’s attention is required for enhancing the deposit base as it decreased with attrition of some major groups. Liquidity position and capitalization indicators remained stable. Going forward, PAIR is focusing on strengthening the credit portfolio by tapping new customers. Management is cognizant of the fact that they need to find new niche for growth and development, hence new avenues like SME segment, are being explored.
The ratings are dependent on the company’s ability to sustain its financial profile while managing the associated risks encompassing active recovery of infected portfolio. Consistent efforts by the management to add further diversity to their portfolio and at the same time stability at CEO's position remains critical for the ratings.
PAIR Investment Company Limited (PAIR) was incorporated in January 2007. The company is a joint venture between Pakistan and Iran, having equal ownership stake. The Ministry of Finance (MoF) manages the ownership interests of the Government of Pakistan, while Iran Foreign Investment Company (IFIC) represents the Government of Iran. PAIR's business activities can be divided into fund based and non-fund based.
The overall control of the company vests with six-member board of directors including the CEO and four non-executive directors. PAIR’s board comprises three directors representing Pakistan and three directors representing Iran. All the team members carry vast experience from diversified sectors. Mr. Hamid Eftekhari Kondelaji, CEO since Aug’17, has been nominated by IFIC and confirmed by the Ministry of Finance. Since Mr. Hamid was not granted work permit, therefore new CEO/MD has to be announced which is expected in the first quarter of CY19.