Muhammad Noor Ul Haq
PACRA Maintains Entity Ratings of OLP Modaraba
The ratings of the Modaraba take fundamental support from its association with OLP Financial Services. The Modaraba’s prompt decision-making framework, together with its efficient management systems, is reflected in the entity’s ratings. PACRA believes there is a high strategic linkage between OLP Modaraba and its Parent Company, and Modaraba’s operation with OLP Financial Services entails synergistic inputs for the entity. A trend of positive financial strategies, causing healthy fund balances and adequate liquidity levels contributed to the maintenance of the ratings. The aforementioned factors also led to the perpetuation of a stable outlook for the Modaraba. In addition, OLP Modaraba profits from its diverse product portfolio, as it can target a significant portion of the customer market. However, the current operating environment poses high business risk as the sales & production of OEMs depicted a significant decrease during the 7MFY23 coupled with a drastic spike in interest rates. This would negatively impact the business performance of modaraba industry going forward. The Company is committed to expanding its portfolio with extreme caution and adopting prudent portfolio management by maintaining its respective risk.
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 a negative impact on the ratings.
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 Parent Company of the Modaraba, OLP – 49.6% owned subsidiary of Orix Corporation, Japan (A- rated by Fitch). OLP Modaraba’s Board of Directors comprises seven members, including the Chief Executive Officer (CEO). The Chief Executive Officer - Mr. Raheel Q. Ahmad - an MBA from MIT, Chicago, has over 30 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.