Karachi, December 17, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of LSE Financial Services Limited (LSEFSL) at ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment coupled with excellent liquidity factors and supported by good fundamentals protection factors. The previous rating action was announced on November 5, 2019.
Ratings assigned to LSEFSL incorporate company’s low business risk appetite given its structured and unique business model. However, some revisions in business model has been made entailing introduction of MSME loans, development of credit department coupled with establishment of related operational policies and procedures. The risk associated with MSME loans is planned to be mitigated through liquid listed securities as collateral, with 35% to 50% margin. Core earnings of the company comprised revenue generation from various avenues while rental income, income from room maintenance and from financial assets constituting around two-third of recurring proportion of earnings, have remained largely stagnant.
Around one-third of the asset base comprised investment in associates, income from the same has provided considerable support to the bottom line on a timeline basis. The ratings also derive comfort from conservative capital structure in absence of commercial borrowings and adequate liquidity. Meanwhile, the company would need to maintain its risk profile by establishment of robust credit approval system along with monitoring of asset quality of MSME loans before developing a loan portfolio. Moreover, the ratings depend on maintenance of leverage indicators around current levels, going forward.
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
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