Press Release

VIS Reaffirms Entity Ratings of First Paramount Modaraba

Karachi, January 16, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of First Paramount Modaraba (FPM or the ‘Modaraba’) at 'BBB/A3' (Triple B/A Three). 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 'A3' indicates fair likelihood of timely repayment of short-term debt obligations with satisfactory liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on December 13, 2023.

First Paramount Modaraba (FPM or the ‘Modaraba’) is a multipurpose, perpetual and multidimensional Modaraba floated under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980. Listed on the Pakistan Stock Exchange, the Modaraba is managed by Paramount Investments Limited (the Management Modaraba), a company incorporated in Pakistan under the repealed Companies Ordinance, 1984 (now Companies Act, 2017) on June 26, 1994. The Modaraba's principal activities include deployment of funds on murabaha, modaraba and musharaka arrangements, along with operating multiple in-house ventures including: (a) Electrical maintenance and troubleshooting services under the name of ‘FPM Solutions’ (b) Chemical business under the name of ‘FPM Petro Services’ (c) Anti-money laundering screening services under the name ‘FPM AML – CHECK’.

During FY24, the financing portfolio contracted as part of a strategic decision to adopt a conservative lending approach, followed by reallocation of resources towards other in-house ventures which offer higher yields. Asset quality remains stable, with a minimal level of non-performing assets reported. FPM has diversified its operations beyond traditional financing by establishing several in-house ventures, including FPM Petro Services being a significant contributor to revenue. Additionally, FPM has established a subsidiary to expand operations in AML/CFT compliance front, alongside the registration of a company in the UK to explore opportunities for compliance related services in the emerging markets. Profitability has improved, with an increase in operating revenues and net profits during FY24. The liquidity profile remains adequate, as indicated by the current ratio, suggesting FPM’s ability to meet short-term obligations.

However, revenue profile remains significantly concentrated, with 96% of earnings derived from FPM Petro Services, exposing it to business risk concentration. Additionally, among the four operational segments, only FPM Petro is profitable. Ratings remain sensitive to sustenance of income from existing in-house ventures, and successful implementation of its new initiatives.

Balance sheet growth has been constrained by restrictions on deposit mobilization, arising from partial compliance of the "The Modaraba Regulations 2021", issued by the Securities & Exchange Commission of Pakistan (SECP). While FPM meets the Capital Adequacy Ratio (CAR) requirement, it does not meet the minimum capital threshold. In December 2024, the Modaraba submitted an equity enhancement plan to the SECP, however its approval is awaited. Achieving compliance with the minimum equity requirements within the stipulated timeline will be important for ratings review.

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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .