Lahore, April 02, 2019 (PPI-OT): Modaraba over the years has been trying to build a sustainable business model. With different attempts, the outcome is not yet materialized. There is recent change at the top level; the incumbent CEO is developing a business plan, which with the auspices of the board, will be implemented. The success of this plan is important.
The relative operating environment has grown significantly. MAM has lagged in the relative peer universe having similar rating characteristics. The ratings draw comfort basically from the association of the Modaraba with Bankislami, via management Company (Bank Islami Modaraba Investment Limited). The ratings of Modaraba is reflective of its equity-based capital structure. Its financing book mainly comprises of Ijarah and Musharaka. Although the asset quality is fully maintained, as NPL’s are fully provided (Loan Loss Provisions / Impaired Lending: 100%).
The Modaraba is planning to raise its income stream through renting out the available extra space from its office premises. The management would maintain largely equity-based capital structure; however, borrowing from the management company/sponsor bank would be an option available to the Modaraba.
The ratings are dependent on the management’s ability to formulate a viable business plan and execute the business strategy to establish the modaraba on its footing. Maintaining healthy asset quality and its equity-based capital structure is important.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com