Press Release

VIS Reaffirms Entity Ratings of Trust Modaraba

Karachi, June 18, 2025: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Trust Modaraba (TM or ‘the Modaraba’) at ‘BBB+/A2’ (Triple B+/A Two). Outlook on the assigned ratings is ‘Stable’. Long-term entity rating of ‘BBB+’ reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of A2 signifies good likelihood of timely repayment of short-term obligations with sound short-term liquidity factor. Previous rating action was announced on May 13, 2024.

The ratings reflect Trust Modaraba (‘TM or ‘the Modaraba’) debt-free capital structure, adequate liquidity profile, and improved profitability metrics, particularly from its Musharakah financing operations. The Modaraba continues to focus on vehicle financing, a niche segment underserved by traditional banks, leading to healthy income generation in a high-interest rate environment. Despite higher operating expenses in absolute terms, the efficiency ratio has improved due to increased recurring income. TM has also recorded gains from the sale of short-term investments, contributing positively to earnings.

Management has taken a cautious stance on Murabaha financing due to recovery challenges, shifting focus towards more secure Musharakah financing. Simultaneously, Ijarah activity has reduced due to an unfavorable tax regime. TM’s exposure remains diversified across entities pertaining to various sectors while concentrating mainly on vehicle financing by way of Diminishing Musharakah mode, due to which risk profile of the financing portfolio has improved. Modaraba’s capitalization profile reflects improvement with an increasing equity base fueled by higher profitability. However, realization of planned recoveries remains imperative for future growth of the Modaraba. Looking ahead, TM also plans to seek deposits to support portfolio expansion; however, capital augmentation in line with the regulatory framework will remain a challenge.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria:

Applicable Rating Criteria: Non-Bank Financial Companies
https://docs.vis.com.pk/Methodologies%202024/NBFCs202003.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright June 18, 2025 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.