The Pakistan Credit Rating Agency Limited
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Maryam Arshad

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PACRA Maintains Entity Ratings of OLP Modaraba

Rating Type Entity
(03-Mar-22 )
(04-Mar-21 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

OLP Modaraba’s (formerly ORIX Modaraba) ratings are driven by the extraordinary support it receives from its shareholders. The Modaraba’s prompt decision-making framework, in tandem with its efficient management systems, is reflective in the entity’s rating. A continuous trend of positive financial strategies, causing healthy fund balances and adequate liquidity levels, backed by stringent adherence to the SECP regulations, contributed to the maintenance of the rating. The aforementioned factors also led to the perpetuation of a stable outlook for the company. In addition, OLP Modaraba profits from its diverse product portfolio, as it can target a significant portion of the customer market.
Business activities experienced a dip due to the emergence of COVID’19, and the economic progress in the country was largely hampered. A decrease in the State Bank of Pakistan’s policy rate durig 2021 had a significant impact on the revenues earned by the Modarabas operating in the country. The rising trend, now, would be augmenting the interest income. OLP Modaraba's revenues too, underwent a small decline. While the ramifications of this menace still persist, the economic wheel has already started rolling. The Modaraba’s revenues are recovering gradually, as social mobility and economic dynamics follow an upward trend in the country. PACRA believes there is a high strategic linkage between OLP Modaraba and its Parent Company, and the Modaraba’s operation with OLP Financial Services entails synergistic inputs for the entity.
The ratings are dependent on the OLP Modaraba's ability to develop and sustain its business profile while ensuring stable profitability and financial metrics. Deterioration in respective business size and consequent margins, leading to erosion of profitability, and/or coverages will have negative impact on the ratings.

About the Entity
OLP Modaraba is a perpetual, multipurpose Modaraba listed on the Pakistan Stock Exchange with a 75% free-float. Overall, OLP Financial Services possesses a 20% stake in the Modaraba, out of which 10% is via direct ownership while the remaining is through its subsidiary, OLP Services Pakistan (Private) Limited. OLP Services is the management company of OLP Modaraba. The company offers both Consumer and Wholesale Shariah Compliant financing products, including Ijarah/Leasing, Diminishing Musharaka, Murabaha and Certificates of Musharaka. The Modaraba primarily provides financing options for housing, computer and office equipment, automobiles, and plant and machinery. The Parent Company of the Modaraba, OLP – 50% owned subsidiary of Orix Corporation, Japan – is rated ‘AA+, and is one of the biggest investment finance companies in Pakistan. OLP Modaraba’s Board of Directors comprises seven members, including the Chairman. Presently, Mr. Shaheen Mohammed Amin is Chairman of the Modaraba. He has an MBA from Booth School of Business, University of Chicago and an Executive MS in Risk Management from Stern School, New York University. The Chief Executive Officer - Mr. Raheel Q. Ahmad - an MBA from MIT, Chicago, has over 29 years of diversified corporate and investment banking experience with both national and international organizations. He is supported by a team of professionals with relevant experience in the financial industry. There are two independent members in the Board as well.

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.