OLP Financial Services Pakistan Limited (‘‘OLP’’ or ‘‘the Company”) commenced commercial operations in 1986 as a private limited company, and a year later, it was converted into a public limited company and was listed on the Pakistan Stock Exchange.

The Company was established as a joint venture between ORIX Corporation (ORIX), Japan, and local investors. Initially, the Company entered operations by offering finance leases. After acquiring the Investment Finance Services license from the SECP, it expanded its operations, allowing it to provide its clients with a full range of financial solutions. Throughout the Company's operations, the blend of international experience and local expertise garnered provided the Company with a unique competitive edge, enabling it to establish and maintain its leadership position in the Modaraba & NBFI industry. 

OLP operates under an Investment Finance Services license from the Securities and Exchange Commission of Pakistan to serve corporates and individual customers. The Company provides innovative financial products and services across Pakistan through a network of 35 branches in 33 cities. The Company offers specialized products, including commercial and consumer vehicle leases, certificates of deposit, term finance, and agri finance, particularly SMEs. 

The Company's main shareholding resides with ORIX (~49.58%),  followed by State Life Insurance Corporation of Pakistan (~9.81%) and Ms. Atiqa Begum (~7.91%). The general public holds ~25.79%, with the rest distributed among various entities.

The Company's majority shareholding lies with ORIX, a renowned sponsor entity that ensures the implementation of a robust strategy in line with the synergies of the sponsor. Further, the Company's experience and ability to adjust to changing business conditions have been its strength. 

Listed on the Tokyo and New York Stock Exchanges, ORIX is Japan's leading integrated financial services group, operating across 28 countries and regions globally. Its business has evolved from leasing to lending, investment, life insurance, banking, asset management, automobile, real estate, and environment and energy-related activities.

ORIX has experienced six decades of operations and has a total asset base of ~¥ 16,502bln as of FY24,  while the equity stood at ~¥ 4,156bln.

The Company has an eight-member Board including deemed director, CEO, five Non-Executive Directors, and two Independent Directors. The Board also includes two Female Directors and adequate representation from ORIX.

Mr. Khalid Aziz Mirza, Chairman of the Board, brings over five decades of experience and has been associated with the Board since Jun-16. Mr. Rashid Ahmed Jafer, an Independent Director, is a fellow member of ICAP and a member of SBP - ICAP Coordination Committee - and has over three decades of experience in statutory audit. He joined the Board on 26-Oct-23. Furthermore, Mr. Anwar Mansoor Khan, an independent director, renowned supreme court lawyer, and ex-attorney general of Pakistan, is also present on the Board. The Board similarly consists of members with years of diverse and relevant experiences.

The Board meets quarterly and is assisted by four Board committees: (I) Audit & Risk Committee, (II) Human Resource Nomination and Remuneration Committee, (III) Credit Committee, and (IV) Compensation Committee to ensure rigorous monitoring of management's policies and the entity's operations. These committees are headed by Independent / Non-Executive Directors. Overall, Board oversight is considered effective with timely meetings, while minutes of the meetings are documented adequately.

The Company's external auditor, M/S. A.F. Fergusons & Co. issued an unqualified audit opinion on the annual financial statements for FY24. For FY25, KPMG Taseer Hadi & Co has been appointed as the Company's external auditors. Both firms are QCR-rated and in category 'A' of SBP's panel.

The Company has a well-established organizational structure that informs, directs, manages, and monitors the activities of the Company to achieve its objectives. All heads of departments report to the CEO, who then reports to the BoD. However, the head of Internal Audit reports to the respective BoD committee.

Mr. Shaheen Amin, the CEO, has been associated with the Company since 1986 and has served in various positions during his tenure. Further, Mr. Mian Faysal Riaz, the COO, has been associated with the Company for over three decades. The management team consists numerous experienced individuals, of whom the majority have over a decade of experience and long span association with the Company.

The decison making and policy implementation process is assissted by the Management Committee, an Asset & Liability Management Committee, the Management Credit Committee and an IT Steering Committee. These committees meet regularly to enhance the governance process throughout the organization. Minutes of each meeting are adequately documented.

The Company has in-house IT application software that has periodically been upgraded and extended to all areas of the business. The Company has implemented numerous policies and procedures, such as the IT Security Policy and Business Continuity Plan, to ensure smooth and continued operations.

The risk department has defined minimum thresholds for credit approval, and all credits falling below the minimum level of threshold are subject to a post-execution risk review, in which the risk department performs a thorough review of credit documents.

NBFCs have emerged as an alternative to the conventional banking system, catering Infrastructure & SMEs, etc., sectors operating in the economy. Despite improving the country's financial inclusion, NBFCs have limited outreach. NBFCs have witnessed ~34.5% YoY growth in total assets from ~ PKR 2,563bln in 6MFY23 to ~ PKR 3,447bln in 6MFY24. NBFCs raise funds mostly from mobilizing deposits. Given the rate sensitivity and asset-liability mismatch, it becomes difficult to price and tenor term loans. Overall, the sector holds ample room to grow, and thus, the outlook remains stable.

The Company holds substantial structural advantages over its peers to support the growth plans and help in maintaining a leadership position in the NBFCs industry. OLP has reported the highest net income of ~PKR 324mln, with the highest asset base of ~PKR 31,787mln in the industry.

Core Income is generated through finance and loans (~59.6%) and finance leases (~40.4%). The Company's topline grew by ~16.6% to ~PKR 6,885mln (FY23: ~PKR 5,903mln) during FY24. This is mainly due to an earning portfolio increase coupled with a high policy rate. On the other hand, during 3MFY25, the topline witnessed a decline of ~6.1% to ~PKR 1,620mln (3MFY24: ~PKR 1,725mln) due to declining interest rates similarly, the markup on the finance lease fell by ~28.9% to ~PKR 542mln (3MFY24: PKR 762mln) during 3FY25. The Company's focus on volume-driven growth is expected to hold stability in overall business growth.  

During FY24, the Company's value-driven growth was impacted by rising interest expense (~22.7%) (FY24: ~PKR 3,876mln, FY23: ~PKR 3,158mln). However, due to a wider interest rate spread, the Company reported an increase of ~15% in its net income, reporting it at ~PKR 1,393mln (FY23: ~PKR1,211mln). On the other hand, during 3MFY25, the Company reported a drop of ~5% in the finance costs to ~PKR 920mln (3MFY24: ~PKR 969mln) due to falling interest rates. Owing to higher inflationary pressure, admin expenses grew, reported at ~PKR 394mln (3MFY24: ~PKR 391mln) in 3MFY25. The Company, facing a trickle-down effect of declining income and increased administrative expenses, reported a declined profit after tax of ~PKR 324mln (3MFY24: ~PKR 379mln). 

The Company's key strengths lie in its robust risk management framework, employing a cautious portfolio-building strategy for future business growth, coupled with ongoing efforts to establish a foundation for launching new products when the market stabilizes.

As of 3MFY25, the Company's non-performing loans (NPLs) totaled ~PKR 904mln (3MFY24: ~PKR 795mln), attributed to economic challenges, notably high inflation. The coverage ratio was ~89.5% as of 3MFY25 (3MFY24: ~110.2%). The well-diversified finances/loan portfolio, with only ~8% concentrated in the top 20 groups, is deemed satisfactory. The Company's extensive track record and understanding of the target customer segment further support asset quality metrics.

The Company is exposed to market risk mainly in the form of movement in interest rates affecting its debt obligations and leases and loan receivables. The Company also has a policy not to assume any unhedged foreign currency position. The Company has an investment book of ~PKR 4,552mln as of 3MFY25 (3MFY24: ~PKR 4,991mln), reporting a decline of ~8.8% primarily due to redemption of treasury bills. The investment portfolio is divided into Government Securities (~52%) and Related Party investments (~47%), with a minimal allocation to the equity market. As of 3MFY25, the Company reported an Investment/Equity coverage of ~42.2% (3MFY24: ~49.0%), a decline of ~6.8% due to a decline in treasury bills lowering the investment book of the Company ultimately impacting the coverage.

The Company utilizes Certificates of Investment/Deposits (COI/COD) and borrows from financial institutes for funding needs. In FY22, an additional PKR 3,000mln was raised through a Privately Placed Term Finance Certificate (PPTFC). As of FY24, the Company's total funding was reported at ~PKR 18,235mln, with a decline of ~2.4% (FY23: ~PKR 18,679mln). This decline was primarily due to PPTFC repayment with an ending balance of ~PKR 1,869mln during FY24 (FY23: ~PKR 2,614 mln).  As of 3MFY25, total funding was reported at ~PKR 18,353mln (3MFY24: ~PKR 17,745mln) with a slight increase of ~3.4% primarily due to a rise in COI/COD by ~17.3% to ~PKR 5,257mln (3MFY24: ~PKR 4,482mln). The Company manages liquidity with a substantial investment portfolio of ~PKR 4,552mln as of 3MFY25 (3MFY24: ~PKR 4,991mln), reporting a decline of ~8.8% primarily due to redemption of treasury bills. The Company's liquidity position is under slight pressure, as evidenced by a decrease in a Liquid Assets/Total Funding ratio of ~14.3% during 3MFY25 (3MFY24: ~16.9%).

As of FY24, the Company's equity base reported an increase of ~6.91% to ~PKR 10,471mln (FY23: ~PKR 9,794mln) due to the increased profit accumulation by ~PKR 661mln. Furthermore, increasing equity and a decline in funding by ~2.4% to ~PKR 18,235mln (FY24: ~PKR 18,679mln) improved the debt to equity ratio to ~1.7x (FY23: ~1.9x). During 3MFY25, a similar rise in the Company's equity base was reported with an increase of ~6.1% to ~PKR 10,794mln (3MFY24: ~PKR 10,178mln) while the debt to equity ratio stood stable at ~1.7x (3MFY24: ~1.7x). The Company has reported an improving Capital Adequacy Ratio (CAR) of ~31.01% as of 3MFY25 (FY24: ~30.23%, 3MFY24: ~28.49%, FY23: 27.22%), highlighting the improvement in OLP's financial strength. Going forward, the Company is expected to enhance its equity from sustained operations, contributing through retained earnings and improving its financial strength over time.