PACRA Assigns Preliminary Rating to Pakistan Mortgage Refinance Company Limited - PPSukuk - PKR 3.0bln - TBI

Pakistan Mortgage Refinance Company Limited ("PMRC" or the "Company") is a Development Financial Institution (DFI) notified by the Government of Pakistan and certified by the State Bank of Pakistan. The assigned ratings take comfort from its shareholding, which is diversified across the Government, a multilateral development institution, and leading Commercial Banks. The Ministry of Finance is the largest shareholder, followed by the International Finance Corporation and nine Banks. This base provides strong strategic support and strengthens the Company’s business franchise. The management team is experienced and stable. Financing is extended with full recourse to Partnered Financial Institutions (PFIs), with no direct retail borrower exposure, which bodes well for the ratings. PMRC occupies a specialized role in Pakistan’s mortgage finance market, providing long-term, fixed-rate liquidity to PFIs against eligible mortgage portfolios, through both conventional and Islamic modes. It also acts as Trustee of the Credit Guarantee Trust, which supports low-income housing finance through structured risk-sharing arrangements. Housing finance continues to receive policy support through government-led initiatives, and the Commercial Banks’ mortgage portfolio grew by 28.9% to PKR 273.9bln in 6MCY26. During CY25, PMRC broadened its offering through Women Housing Finance and Mera Ghar Mera Aashiana products and expanded its green/solar housing finance suite.
On the financial profile side, Investments reached PKR 55.7bln at end-6MCY26, predominantly in Federal Government securities, providing a sizeable liquid asset buffer with minimal credit risk and limited interest rate sensitivity. Repo borrowings increased significantly to PKR 25.5bln at end-6MCY26 (CY25: PKR 8.0bln), providing additional liquidity to the Company. Advances grew 17.1% to PKR 40.4bln at end-CY25 and reached PKR 44.1bln at end-6MCY26, of which the Islamic (Musharakah-based) portfolio was PKR 26.4bln (58.8%). Financing is extended with full recourse to PFIs, with no direct retail borrower exposure, and Commercial Banks account for 92% of the portfolio (CY24: 88.3%). Equity increased 14.6% to PKR 15.4bln at end-CY25 (CY24: PKR 13.4bln), supported by retained earnings, and stood at PKR 15.3bln at end-6MCY26. The Capital Adequacy Ratio was 81.7% at end-CY25 (CY24: 92.2%).
Going forward, the rating will remain sensitive to PMRC’s ability to sustain asset quality, manage funding costs given the mismatch between its predominantly fixed-rate asset book and short-term repricing liabilities, manage its reliance on short-term wholesale funding (borrowings of PKR 66.9bln at end-6MCY26, excluding subordinated debt), and continue to grow housing finance and fee-based activities.

About the Entity
PMRC was incorporated in May 2015 and notified as a DFI by the Finance Division, Government of Pakistan, in October 2017. PMRC was established to address the shortage of housing finance in Pakistan by providing long-term liquidity and fixed-rate funding to primary mortgage lenders, improving affordability and developing the mortgage and capital markets, including Islamic assets.

About the Instrument
PMRC proposes to issue a secured, privately placed Sukuk (“PP Sukuk” or the “Instrument”) of up to PKR 3.0bln, with a 1.5-year tenor and bullet repayment at maturity. Profit will be paid quarterly at Base Rate + 20bps, subject to a 5% floor and 30% cap. Proceeds will fund the pre-financing/refinancing of mortgage portfolios. The Sukuk will be secured through a first exclusive hypothecation charge over specified Shariah-compliant receivables, with a 10% margin, supplemented by lien marking on eligible liquid assets for temporary shortfalls.