JCR-VIS Reaffirms Entity Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited

Islamabad, June 09, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) at ‘AA+’ (Double A Plus) and short-term entity rating at ‘A-1+’ (A-One Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on Dec 01, 2014.

Ratings assigned to Saudi Pak take into account the shareholders’ profile, with two sovereigns, Government of Pakistan (GoP) and Kingdom of Saudi Arabia (KSA), having an equal stake in the company under the terms of a joint venture agreement.

Ratings also recognize overall improvement in the company’s financial risk profile on account of three years long strategy of balance sheet restructuring. Various steps taken by the management over this period have translated into improved operating results and enhanced financial flexibility. With growth-oriented strategy, the company would require strengthening of second line of management to fill skill gaps.

In line with the business plan, the management enhanced its focus on business expansion during the outgoing year. Given the thin spreads in lending to top tier corporate, the company’s risk appetite remains moderate, with disbursements mainly targeted towards mid tier companies. Net non-performing assets represented around one-third of tier-1 capital. These assets, though declining on a timeline basis, continue to place a drag on the company’s performance.

With pricing of both loans and borrowings linked to market benchmark rates, the company’s spreads are not likely to be meaningfully affected by the reduction in key policy rate. Moreover, the company has locked in PIBs at higher rates. Future profitability is likely to remain a function of asset mix, size and quality.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk