Press Release

JCR-VIS Reaffirms Entity Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited

Karachi, June 09, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) at ‘AA+’ (Double A Plus) and short-term entity rating at ‘A-1+’ (A-One Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on Dec 01, 2014.

Ratings assigned to Saudi Pak take into account the shareholders’ profile, with two sovereigns, Government of Pakistan (GoP) and Kingdom of Saudi Arabia (KSA), having an equal stake in the company under the terms of a joint venture agreement.

Ratings also recognize overall improvement in the company’s financial risk profile on account of three years long strategy of balance sheet restructuring. Various steps taken by the management over this period have translated into improved operating results and enhanced financial flexibility. With growth-oriented strategy, the company would require strengthening of second line of management to fill skill gaps.

In line with the business plan, the management enhanced its focus on business expansion during the outgoing year. Given the thin spreads in lending to top tier corporate, the company’s risk appetite remains moderate, with disbursements mainly targeted towards mid tier companies. Net non-performing assets represented around one-third of tier-1 capital. These assets, though declining on a timeline basis, continue to place a drag on the company’s performance.

With pricing of both loans and borrowings linked to market benchmark rates, the company’s spreads are not likely to be meaningfully affected by the reduction in key policy rate. Moreover, the company has locked in PIBs at higher rates. Future profitability is likely to remain a function of asset mix, size and quality.

For further information on this rating announcement, please contact the undersigned (Ext: 508) at 021-35311861-70 or fax to 021-35311872.



Mohammed Khalid Ali
Advisor


JCR-VIS Entity Rating Criteria: Government Supported Entities (July 2002)
http://jcrvis.com.pk/images/gse.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 09, 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.