Press Release

JCR-VIS assigns positive outlook to ratings of First Paramount Modaraba

Karachi, December 26, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the ratings of First Paramount Modaraba (FPM) at ‘BBB/A-3’ (Triple B/A-Three). Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on January 28, 2013.

The assigned ratings incorporate conservative risk profile of the Modaraba with low leverage and sizeable liquid assets in relation to deposits and borrowings. Leverage indicators have historically remained below 1(x) and are projected to continue to remain below 1(x) over the foreseeable horizon. The conservative capital structure of the Modaraba is a key rating consideration and change in strategy in this regard may trigger rating review.

FPM only mobilizes funds through Certificate of Musharaka (CoMs), cost of which compares favorably to secondary market borrowings. While concentration in CoMs is notable, liquidity profile is supported by sizeable liquid assets carried on balance sheet.

Murabaha financing continues to be the primary financing mode; the management has also ventured into a number of Musharaka projects whereby FPM invests a portion of the capital for the projects and utilizes expertise of third parties. Results of these projects have varied, with management planning to exit from projects where returns have been lower than projected. Going forward, exposure to Musharaka projects is projected to remain around one-fifth of the overall financing portfolio with Murabaha financing continuing to dominate the financing mix.

Profitability declined for a second consecutive year in FY14, on account of investment in Musharaka projects, returns from which are expected to emanate in future periods. Capitalization levels are planned to be enhanced through rights issue every year for the next four years and internal profit generation. The modaraba’s ability to maintain portfolio quality indicators and improve profitability while maintaining leverage within prudent limits will continue to be monitored by JCR-VIS.

For further information on this rating announcement, please contact the undersigned (Ext: 408) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 or fax to 021-35311872-3.



Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria: Modaraba Rating Scale (October 2002)

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