PACRA Maintains Entity Ratings of First Punjab Modaraba

First Punjab Modaraba ('the Modaraba') ratings reflect its association with The Bank of Punjab (BoP) (Rated AA+ by PACRA). The Modaraba's earning assets, particularly in the lending sector, primarily focuses on vehicle financing. Income levels have improved, supported by high interest rates. However, overall growth remains sluggish with core income performance deteriorating due to high finance costs. The accumulation of losses remains a pressing concern impacting the equity base of the Modaraba and hindering its business generation capacity. The sponsor - Bank of Punjab (BoP) - has provided long term redeemable capital of PKR 1.5bln, lately locked at a subsidized rate of 18.61%. This along with a recent injecteion of subordinated loan of PKR 500mln, which has improved overall liquidity, enhances the business generation capacity by increasing per-party limits. Despite this support, challenges in maintaining a healthy equity position persist. Leveraging the sponsor's support, the Modaraba has made strategic deposits with banks to generate supplementary income and bolster overall performance. The Modaraba is adhering to a comprehensive business plan approved by Modaraba’s Board, aiming to revamp its overall operational performance by CY27. However, the modalities and materialization of the plan requires clarity. Support from the sponsor remains pivotal. Considerably weak financial position financial profile and the ongoing challenges requires vigilance.
The ratings are dependent on the relative positioning of the Modaraba in the sector and the sustained asset quality of the new portfolio: achieving bottom-line profitability is important. Meanwhile, any weakening in the financial profile or support from the sponsor could have negative implications.

About the Entity
First Punjab Modaraba ('the Modaraba'), established in 1992, is a perpetual and a multi-diensional Modaraba, is listed on Pakistan Stock Exchange. The Modaraba is engaged in financing through Ijarah, Morabaha and Diminishing Musharaka. Punjab Modaraba Services (Pvt.) Limited, a wholly owned subsidiary of The Bank of Punjab (BoP), is the Management Company of the Modaraba and holds a stake of ~39% stake in the Modaraba. General Public holds a stake of ~ 40%. While, the remaining ~21% is held by financial institutions. The Board of Directors is chaired by Nadeem Amir. While, lately, Mr. Mudassar Kaiser Pal has been designated as the acting CEO of the Modaraba. He is supported by an adequate management team.