Wajahat Arjumand Ansari
PACRA Assigns Initial Rating to PPTFC of OLP Financial Services Pakistan Limited
|Rating Type||Debt Instrument|
The ratings reflect OLP's leading market position in the industry. The presence of three independent, two executive and four non-executive Directors on the Board, having vast industry experience in their respective fields, provides comfort to the governance structure of the Company. Further, the Company utilizes its experience of the past thirty-five years to gauge the market situation and take right decisions in the evolving industry environment.
In the aftermath of COVID-19, the recovering economy paved a path to induce growth in the financial sector. Such growth inspired customer confidence, directing business towards the financial industry, duly reflected in the financial performance of the Company. Going forward, the increasing trend in the policy rate may have a mixed customer response and contractionary economic conditions may pose a challenge in the upcoming period. Nevertheless, OLP remains focused on maintaining the quality of its financial assets and exploring additional options to enhance profitability, successfully achieved in the reported period. The Company is committed to expanding its portfolio with extreme caution and adopting prudent portfolio management by maintaining its respective risk.
The Company maintains a fairly healthy funding structure; main source of funding remains bank borrowing and CoDs, with additional privately placed term finance certificates being issued to strengthen the funding structure of OLP. The Company’s ability to maintain its market position while generating sound profitability is due to a diverse customer base. Investment in finance leasing represented a major portion of the earning assets, while finance and loan portfolio is also increasing at a rapid pace due to high demand for financing of saloon cars with further products in this segment being envisaged. The Company maintains a strong CAR of 29.1% as at 6MFY22 comfortably fulfilling the minimum requirement of 10%.
The Company’s rating also depends upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.
OLP Financial Services Pakistan Limited commenced commercial operations in 1986. OLP is listed on Pakistan Stock Exchange (PSX) and is majorly owned by ORIX Corporation (49.58%), Arif Habib Equity (Pvt.) Limited (7.53%) and State Life Insurance Corporation (SLIC) (5.25%). The remaining shareholding is distributed among other corporates and the general public. OLP has a financial services license and is expanding its operational scope. The company has rebranded itself from “ORIX Leasing Pakistan Limited” to “OLP Financial Services Pakistan Limited” to reflect the company’s focus on providing full spectrum of financial services to its customers.
The issue amount is PKR 3,000mln. Allied Bank Limited shall be the Financial Advisor and Lead Arranger. Tenor is up to 05 years with a 1-year grace period. The profit rate is 3-month KIBOR plus 80bps (11.22%) per annum with no floor or cap. Repayments shall be made in 16 equal quarterly installments, with the first principal repayment falling due at the end of 15 months from the date of the first disbursement. The proceeds are mainly to support and expand the leasing book.