Muhammad Atif Chaudhry
PACRA maintains the rating of OLP Financial Services Pakistan Limited | PPTFC (Formerly ORIX Leasing Pakistan Limited | PPTFC)
The ratings reflect OLP’s leading market position in the industry. The Company maintained its position backed by its wealth of experience in the industry. The ratings also reflect OLP’s association with ORIX Corporation (ORIX), its parent company. The company derives synergies with the Group in strengthening its governance structure, internal policy framework and prudent risk management approach. In current environment, when the economy is facing severe challenges, coupled with political uncertainties, the Company has shown sustained results. Significant decrease in sales and production of OEMs during 7MFY23 and increasing policy rates cause high business risk for the Company. However, OLP successfully maintains its business risk in the reported period due to its focus on cautious approach in writing new business, customer diversification, maintaining quality portfolio and expanding market reach through launch of new products as per the market need. Going forward, the increasing trend in the policy rate, inflationary pressure on price of assets and contracting economy may pose challenge to the Company’s profitability. Nevertheless, the Company is committed to expanding its portfolio with due caution, adopting prudent portfolio management by maintaining its respective risk and profitability. The Company maintains a fairly healthy funding structure; main source of funding remains bank borrowing besides CoDs and privately placed term finance certificates. Diversified source of funding strengthens the funding structure of OLP. The Company maintains a strong CAR of 27.6% as at end-sep22 comfortably fulfilling the minimum requirement of 10%.
The Company’s rating also depends upon keeping its financial and sponsor profile intact. Any significant change in its risk profile may adversely impact the ratings.
OLP Financial Services Pakistan Limited (OLP) commenced commercial operations in 1986. OLP is listed on Pakistan Stock Exchange (PSX) and is majorly owned by ORIX Corporation (49.58%), Arif Habib Group (6.78%) and State Life Insurance Corporation (SLIC) (5.25%). The remaining shareholding is distributed among other corporates and the general public. OLP has Investment Financial Services license and is expanding its operational scope. The Board of Directors (BoD) comprises nine members. It is composed of four Non-Executive Directors representing ORIX Corporation, three independent directors and the Chief Executive Officer (CEO) and Deputy CEO as Executive Directors. Mr. Shaheen Amin, the CEO, is a seasoned professional and has been associated with the ORIX group since 1986. OLP has a well-defined organizational structure alongwith experienced professionals heading key functions.
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 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.