PACRA Maintains Entity Ratings of OLP Modaraba

The ratings of OLP Modaraba (“the Modaraba”) derive strength from its association with the ORIX Group, through OLP Financial Services Pakistan Limited, which provides a robust governance framework and strategic oversight. The Modaraba’s prudent risk management practices and disciplined operating approach continue to support its stable business profile and controlled risk appetite. Pakistan’s non-banking finance sector, particularly the Modaraba segment, operates in a gradually improving macroeconomic environment. The Modaraba sector witnessed moderate asset growth during FY25, primarily supported by elevated benchmark rates for most of the year and stable demand for Shariah-compliant financing solutions. Profitability across the sector remained resilient, underpinned by improved spreads, disciplined cost structures, and controlled credit risk. However, a declining interest rate cycle initiated during FY25 poses emerging pressure on margins, necessitating volume-led growth strategies and enhanced efficiency across the sector. Asset quality indicators for the sector remained largely stable, reflecting cautious underwriting practices, while liquidity profiles improved on the back of selective balance-sheet optimization and increased reliance on diversified funding avenues. The Modaraba benefits from a diversified Islamic financing portfolio, with Diminishing Musharika and Ijarah remaining the core earning segments, supported by a geographically diversified footprint. Despite a gradually easing benchmark rate environment, the Modaraba has demonstrated resilience in its earnings profile. During FY25, the Modaraba reported a profit after tax of PKR 174mln (FY24: PKR 158mln), reflecting sustained profitability supported by effective pricing discipline and portfolio management. On the financial risk front, the Modaraba has a capitalization profile with equity recorded at ~PKR 1,327mln as of Jun-25. Asset quality indicators remained stable, with non-performing advances contained at ~PKR 177mln as of Jun-25, underscoring prudent credit underwriting standards and effective recovery mechanisms. The Modaraba’s liquidity position remains adequate, supported by healthy liquid assets and a diversified funding mix. As of Jun-25, liquid assets stood at ~PKR 604mln, translating into a liquid-assets to funding ratio of ~8.6%, indicating an improved liquidity buffer compared to previous periods. Funding continues to be largely driven by borrowings, which are actively managed to optimize cost and maturity profiles.
Going forward, the ratings are dependent on the Modaraba’s ability to sustain asset growth, preserve margins amid a declining benchmark rate environment, and maintain sound asset quality metrics. Any material deterioration in business volumes, profitability, capitalization, or liquidity indicators may exert pressure on the ratings.

About the Entity
OLP Modaraba is a perpetual, multipurpose Modaraba listed on the Pakistan Stock Exchange. OLP Financial Services Pakistan Limited holds approximately 20% stake in the Modaraba, comprising around 10% direct ownership, with the remaining stake held through its subsidiary acting as the Management Company. The remaining shareholding comprises insurance companies, financial institutions, joint stock companies, and the general public. The Modaraba’s Board is chaired by Mr. Naveed Kamran Baloch, while Mr. Raheel Qamar serves as the Chief Executive Officer, supported by an experienced management team.