Karachi, April 04, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/A-Two) to Security Investment Bank Limited (SIBL). The long term rating of ‘BBB+’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
Set up in 1991, SIBL operates as a non-deposit taking Non-Banking Finance Company (NBFC) providing both funded and non-funded facilities and advisory services to clients. SIBL now plans to operate as a deposit taking NBFC and has applied to the Securities and Exchange Commission of Pakistan (SECP) for this purpose. The assigned ratings derive strength from demonstrated track record of support of SIBL’s sponsors with majority shareholding held by individuals belonging to the ARY Group (ARY). ARY is a diversified group with interests in several sectors including media, apparel, retail and real estate.
Financing portfolio of SIBL has nearly doubled over the last two years. However, financing has primarily been extended to associated companies. While financing book currently comprises no non-performing exposures, credit risk of performing loan portfolio is on the higher side with 3 out of 4 borrowers reporting operating losses and having weak capitalization indicators. Concentration in financing portfolio stands high with just four corporate clients in the portfolio. Going forward, management plans to reduce concentration (repayment plan from existing counterparties has been submitted to SECP and first installment has been received from related parties) in financing portfolio with focus on consumer and machinery financing. Given that asset base is mainly funded by equity, overall liquidity profile of the institution is considered sound. As such, there are no major borrowings outstanding which may trigger liquidity call.
In order to achieve envisaged business growth, the company is exploring various funding options which include certificates of deposit. In this regard, SIBL has applied for status of deposit taking investment company, minimum equity requirement for which is Rs. 750.0m. Equity base of SIBL stood at Rs. 784.4m at end-2018 and has increased on a timeline basis on account of profit retention and subordinated loan from sponsor. Leverage indicators stand on the lower side with debt leverage and gearing of less than 0.10x as at end-2018. However, with projected growth in liabilities to achieve business growth, leverage indicators may trend upwards going forward. Counterparty assessment tools will be tested over time as SIBL undertakes planned expansion in credit activities along with induction of personnel with required skill set. Given the challenges faced by the overall NBFCs sector, successful execution of the business plan will remain an important rating consideration.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: http://jcrvis.com.pk/