PACRA Downgrades the Entity Ratings of KASB Modarba

Lahore, June 29, 2018 (PPI-OT):The ratings reflect KASBM’s adequate financial profile emanating from low-leveraged capital structure, depicting maturing COM’s. The Modaraba starts making losses. In FY16, SECP restricted KASBM from raising new CoMs. This decision is subject to reconsideration depending on the performance of the Modaraba in FY17 but still pending with SECP. Owing to this restriction, KASBM has experienced contraction in its COMs (9MFY18: PKR 56mln; FY17: PKR 100mln; FY16: PKR 425mln). Although, KASBM has met all the maturities of COM’s. The Modaraba witnessed squeeze in its assets, with a consequent impact on performance of the Modaraba.

Liquidity is being managed. However, KASBM’s ability to recover from losses would be important. During the year, Modaraba charged provisioning against the doubtful receivables which ultimately impact the bottom line. To meet the funding challenge though, the management is also controlling its cost structure within bound. The management has managed the deposit maturities successfully and remained compliant despite the liquidity constraints being faced by the Modaraba. Modaraba’s more focus is towards more funding lines from banks and search for new businesses for Modaraba to survive.

The ratings are dependent on the KASBM’s ability to maintain its asset quality and improve itsprofitability. Vigilance in liquidity management remains important. Taking new funding lines and tapping new stable revenue stream to improve business profile 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

You May Also Like