Press Release

VIS Reaffirms Entity Ratings of Sindh Modaraba

Karachi, June 30, 2022: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of A+/A-1 (Single A Plus/A-One) assigned to Sindh Modaraba (SM). Outlook on the assigned ratings is Stable. The long term rating of A+ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. The short term rating of A-1 signifies high certainty of timely payments. Liquidity factors are excellent and supported by good fundamental protection factors. Previous rating action was announced on June 29, 2021

Assigned ratings derive strength from the indirect ownership of Government of Sindh through Sindh Modaraba Management Limited. The sponsor has demonstrated both technical and financial assistance to SM. VIS expects the support to continue in future as well.

Financing portfolio has depicted a mixed trend over the past few years; whereas management cites recent slowdown in the same due to changes in management post sad demise of the CEO. Therefore timely appointment of new CEO remains crucial in deriving future business strategy. Non-performing portfolio depicts a rising trend, especially on account of two court cases customers. However, some recoveries have been made. Part of this was on account of stringent classification requirement for Modaraba companies. In light of heightened credit risk environment, we expect additional provisioning pressure from the existing NPLs portfolio which shall constrain future profitability. However, higher profit generated from liquid funds will provide support to the profitability.

Overall net profit decreased during FY21 and in ongoing year on account of higher provisioning expense, lower income generated from Bank deposits in the low interest rate period and implementation of tax charge on Modaraba companies effective FY22 on wards. The liquidity and capitalization indicators of the Company are considered sound with no profit payment on its balance sheet. However, asset quality metrics depict a weakening trend and recouping the same in line with assigned benchmarks as well as maintenance of profitability indicators is considered important from a ratings perspective.

For further information on this rating announcement, please contact Ms. Nisha Ahuja, CFA or the undersigned (Ext: 201) at (021) 35311861-66 or email at

Javed Callea

Applicable Rating Criteria: Non-Bank Financial Companies (March 2020)

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .