The Pakistan Credit Rating Agency Limited
Press Release


Nabia Rauf

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Downgrades the Ratings of Escorts Investment Bank Limited | Negative Outlook

Rating Type Entity
(19-Sep-23 )
(20-Mar-23 )
Action Downgrade Maintain
Long Term BBB+ A-
Short Term A2 A2
Outlook Negative Developing
Rating Watch - Yes

Escorts Investment Bank Limited ("Escorts Bank" or "the Bank") is a subsidiary of Bahria Town (Pvt) Limited, a privately owned real-estate development company that owns, develops, and manages properties across Pakistan. Due to critical economic situation of the Country, the Bank's operational performance is expected to remain susceptible. Lately again, through a notice placed on PSX, an intention to acquire stake in the Bank has been shared. The Bank must be funded through equity so as to sustain operations and Investment Finance Services (IFS) license. Escorts Bank has adopted a cautious approach to avoid non-performing loans and the revenue gather support from profit on financing, followed by the other income. Relevant to the Bank’s business model, house finance is a prominent contributor to the Bank’s total portfolio. A major proportion of revenue comes from mortgage and micro finance portfolio. On net level, the Bank continues to incur losses due to higher non-markup expenses. Earlier, write-off of tax refunds (pertaining to pre takeover period) and re-assessment of deferred tax asset; owing to change in business plan rendered the Bank short of equity as required to maintain under NBFC Regulations. Going forward, development of a comprehensive business plan, with clear modalities and materialization, remains critical for the Bank. Escorts Bank's capital structure mainly comprises of equity, with a stagnant debt-to-equity ratio. Escorts Bank remains non-complaint with Minimum Capital Requirement of PKR 750mln. Sponsors support, inform of equity injection, remains vital for the ratings. Overall, considerable weak financial position of the Bank and the ongoing economic challenges leads to a rating adjustment and a Negative Outlook with the opinion.
The ratings are dependent on the Bank's relative standing and improved asset quality of the existing portfolio. Moreover, achieving bottom line profitability is important. Meanwhile, any further weakening in the financial profile or lack/delay in support from the sponsor could further impact the ratings.

About the Entity
Escorts Investment Bank Limited ("Escorts Bank" or "the Bank"), a Non-Banking Finance Company (NBFC), was incorporated in Oct-96 as a public listed entity. The Bank's prime activity is to provide facilities of micro finance, corporate finance, housing finance and certificates of deposits to corporate and individual clients accordingly.
Major stake of the Bank lies with Bahria Town (Pvt.) Ltd. (~88%), one of the leading real-estate development company in Pakistan. The Bank's Board is chaired by Mr. Tahir Nawzish. While, Mr. Basit Rahman Malik serves as the CEO. He is assisted by experienced professionals.

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.