PACRA Maintains Instrument Rating of OLP Financial Services Pakistan Limited | PPTFC

The ratings reflect OLP Financial Services Pakistan Limited's (“OLP” or the “Company”) leading market position in the industry. The Company maintained its position backed by its extensive experience in the industry. The Company utilizes its expertise to gauge the prevailing conditions and make adaptive decisions in the evolving environment. 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. Amidst severe economic challenges, the Company has demonstrated sustained financial performance. The significant decline in OEM sales and production, coupled with high policy rates during FY24, posed a high business risk for the Company. Given that OLP is heavily involved in vehicle financing (~78%), the challenges remain pronounced. Nevertheless, OLP was able to leverage the policy rates, resulting in reported value-driven growth. Adapting to market dynamics, the Company strategically shifted its focus towards the second-hand car market. The Company must maintain business risk through a cautious approach in writing new business, customer diversification, quality portfolio maintenance, and expanding market reach with strategic product launches. However, the persistently high inflation and contraction of consumer buying power pose ongoing challenges. Nonetheless, the Company remains committed to expanding its portfolio with caution, adopting prudent portfolio management practices to maintain risk and profitability. OLP maintains a healthy funding structure primarily from financial institutions, supplemented by Certificates of Deposit (CoDs) and a Privately Placed Term Finance Certificate (PPTFC). Diversified funding sources strengthen OLP's financial position. Additionally, the Company possesses a significant investment portfolio for liquidity management, supported by a strong capital position, as evidenced by its robust Capital Adequacy Ratio (CAR).
The Company’s rating depends upon keeping its financial and sponsor profile intact. Any significant change in its risk profile may adversely impact the ratings.

About the Entity
OLP Financial Services Pakistan Limited (“OLP” or “the Company”) is a public listed company. OLP offers value-added financial products and innovative customized services to a wide array of customers throughout Pakistan. The Company holds an Investment Finance Services license under Non-Banking Finance Companies Rules. The Company's shareholding is led by ORIX Corp. (~49.58%), followed by State Life Insurance Corporation (~9.81%). The general public holds ~33.71%, with the rest distributed among various entities. Mr. Khalid Aziz Mirza serves as the Chairman of the Board, with Mr. Shaheen Amin as the CEO. OLP houses a seasoned management team consisting of highly experienced professionals.

About the Instrument
The issue amount is PKR 3,000mln, with Allied Bank Limited acting as the Financial Advisor and Lead Arranger. The tenor is up to 5 years, including a 1-year grace period. The profit rate is set at 3-month KIBOR plus 80bps per annum, with no floor or cap. Repayments will be made in 16 equal quarterly installments, with the first principal repayment scheduled at the end of 15 months from the date of the first disbursement. The proceeds aim to support and expand the leasing book.