Press Release

VIS Assigns Initial Entity Ratings to Taleem Finance Company Limited

Karachi, September 11, 2024: VIS Credit Rating Company Limited (‘VIS’) assigns initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to Taleem Finance Company Limited ('TFCL’ or the 'NBFC’). Medium to long term rating of ‘BBB’ indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A-2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’.

TFCL was incorporated under the Companies Act 2017 in Mar’19. TFCL is engaged in the provision of Investment Finance Services as a Non-Banking Finance Company (NBFC) under license from Securities and Exchange Commission of Pakistan (SECP) issued in Jun’19 and subsequently renewed in Sep’22. The principal line of business of the TFCL is lending money to low-income private Education Institutions in Pakistan. Additionally, TFCL offers financial support to other companies, firms, or individuals under terms and conditions deemed appropriate, with or without security, for provision of educational services and related technology to Education Institutions in Pakistan.

TFCL is a relatively new NBFC that commenced full-scale operations post-COVID. Despite its nascent stage, TFCL has demonstrated rapid growth in terms of branch network, loan officers, and active borrowers. TFCL benefits from a seasoned management team with extensive financial sector experience. The NBFC has established strong corporate governance structures, including board committees and management committees. Moreover, the development of the Taleem Connect App for offering the Taleem Express Sahulat (TES) digital loan product, positions TFCL for future growth in the digital lending space.

TFCL exhibited growth in its loan portfolio, supported by increasing disbursements and recoveries. While overall asset quality has been sustained, maintenance of asset quality will remain a challenge amidst portfolio expansion. TFCL continues to strengthen its mitigation strategies for these challenges. Ratings take comfort from NBFC’s conservative provisioning policy demonstrating a cautious and proactive approach to managing credit risks. Albeit improvements in operational efficiency, it remains constrained, consequently impacting profitability. Management anticipates achieving profitability by CY25.

TFCL's liquidity and capitalization profile remains adequate, albeit showing a notable shift towards increased reliance on borrowings as the primary source of funding. Going forward, management plans to inject additional equity and /or convert loans to equity to strengthen the capital base. The successful execution of its growth strategy, including expansion of its branch network, enhancement of digital product offerings, maintenance of effective risk management as well as materialization of planned conversion of loan into preferences shares and equity injection will be important rating considerations.

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


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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .