PACRA Maintains Entity Ratings of PAIR Investment Company Limited

Lahore, December 17, 2019 (PPI-OT): Development Financial Institutions (DFIs) largely operate on turf common to commercial banks. Limited depth in participation towards development of long gestation projects, low funding base, and high competition become their key challenges. Joint Venture Financial Institutions are DFIs jointly conceived by the two sovereigns with primary objective of identifying and nurturing multiple development initiatives. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite.

The ratings assigned takes into account PAIR’s ability to sustain its position among peers. The Company’s lending portfolio remained largely same, during 9MCY19. Asset quality is deteriorated by addition of a major clients into ‘non-performing category’; though related provisioning has been created. This along with realised loss on sale of securities reduced the profitability. Management has created an adequate mix of sectors in advances, though client concentration remains high. The capital and treasury division’s primary focus of investment was Government securities; minor portion vested in Equities, Sukuk and TFCs and funds.

During the year, investment book increased providing good cushion to liquidity. The company has taken sizable exposure into government securities, wherein market risk dominates. Borrowing from financial institution remains the primary source whereas COI’s minuscule part is funding base. Liquidity position and capitalization indicators remained stable. Going forward, PAIR is focusing on strengthening the existing relationships. Management is cognizant of the fact that they need to find new niche for growth and development, hence new avenues like SME segment, are being explored. However, nothing material is on the horizon, over the medium term. The MD/CEO is not in Pakistan, though taking care of the company’s affairs from abroad.

The ratings are dependent on the company’s ability to sustain its financial profile while managing the associated risks encompassing active recovery of infected portfolio. The concentration level in funding and advances needs to be pro-actively managed. Consistent efforts by the management to add new sectors/names to further diversify their portfolio, increase in provisioning expense and subsequent effect on profitability and at the same time stability at MD/CEO’s position remains critical for the ratings.

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