Press Release

JCR-VIS Reaffirms Ratings of First Paramount Modaraba at BBB/A-3

Karachi, December 29, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings of First Paramount Modaraba (FPM) at ‘BBB/A-3’ (Triple B/A-Three). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 30, 2016.

Given the six-month long restriction imposed by the regulator on raising additional COMs, financing portfolio (net of deferred income) of FPM reduced during FY17. Largest chunk of the portfolio is contributed by murabaha financing; business mix is expected to remain the same going forward. Despite concentration in the financing portfolio, a single exposure does not exceed more than 10% of its equity base. Nonetheless, quality of the financing portfolio must be maintained in order to ensure sustainability and growth in earnings. Infection levels of the company continue to remain low.

Despite a lower financing base, revenue base of the company increased on the back of proceeds from its in-house petrochemicals venture. Nevertheless, growth in the top-line was outweighed by increase in its expense base. Subsequently, profitability levels of the company declined in the period ending June 30, 2017. Going forward, management projects its in-house ventures to continue supporting its profitability levels.

FPM only mobilizes funds through Certificate of Musharaka (CoMs). With lifting of the regulator’s restriction on CoM issuance, the company plans to recoup its deposit base in order to finance operations. In order to fund growth of its financing portfolio, management also plans to inject approximately half of its paid up capital as equity during FY18; developments in this regard are yet to materialize. Liquidity profile has weakened on the back of limited liquid assets carried on balance sheet. 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: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi
Advisor

Applicable Rating Criteria: Modaraba Rating Scale (October 2002)
http://www.jcrvis.com.pk/images/JCR-Mod.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 December 29, 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.