The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term and short-term ratings of First Punjab Modaraba (FPM) at "BBB" (Triple B) and "A3" (A Three), respectively. These ratings denote low expectation of credit risk and an adequate capacity for timely payment of financial commitments.
The ratings reflect strong association of FPM with the Bank of Punjab (BoP) - a bank majority owned by the Government of Punjab. On a standalone basis, FPM has weak financial profile, a result of continuous business losses, potential drag of un-provided non-performing loans on already thin equity base, and inadequate liquidity. Nevertheless, BoP, besides providing funding support, is in the process of merging the Modaraba into it.
The ratings are dependent on timely and successful execution of the sponsor's plan. Considering the merger process, Pacra has placed the ratings of FPM on Rating Watch. In this regard, any weakening in the perceived support from the sponsoring bank would carry negative implications for the ratings. First Punjab Modaraba, established in 1992, is a perpetual multi-purpose Modaraba listed on all three bourses of the country.
The management company, Punjab Modaraba Services (Pvt) Limited (PMSL), holds 40 percent stake in the Modaraba. PMSL is a wholly owned subsidiary of The Bank of Punjab (BoP). The bank operates a vast network of 284 branches, mainly concentrated in Punjab. The Government of Punjab (GoPb) maintains majority stake in BoP (51 percent), whereas, 13 percent is owned by EOBI and the rest by various stakeholders. It carries a long-term entity rating of 'AA-' from Pacra.
The deputy CEO of BoP, Khalid Tirmizey, chairs the five-member Board of the Modaraba. The CEO, Khaqan Hasnain Ibrahim, is an MBA and possesses above 30 years of diversified experience in financial management. Of the remaining three board positions, two are held by executive members of BoP while the other is an independent member.-PR
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