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The Pakistan Credit Rating Agency Limited

Date
15-Dec-2017
Analyst
Mahina Majid
mahina.majid@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Bank Rating (Jun 17) [View]

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PACRA Maintains Entity Ratings of Pakistan Kuwait Investment Company (Pvt.) Limited
 Rating Type Entity
Current
(15-Dec-2017)
Previous
(14-Jun-2017)
 Action Maintain Maintain
 Long Term AAA AAA
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings of Pakistan Kuwait Investment Company (Private) Limited (PKIC) primarily rests on the equal ownership of the company by Government of Pakistan (GoP) through State Bank of Pakistan (SBP) and by Government of Kuwait through Kuwait Investment Authority (KIA). The ratings benefit from the company's strong financial profile emanating from robust risk absorption capacity and sound liquidity. Despite increasing credit offtake in the country, PKIC’s lending book did not expanded much following a prudent lending and risk management approach. The management is cognizant of the opportunities and is contemplating an appropriate strategy. Nonetheless, the build-up of strategic equity investments in different companies provides a strong and stable income stream in the shape of dividends, hence, comforting the net profits. The company has focused on treasury operations where it is enhancing its participation in money market. The liquidity profile of the institution remains comfortable. PKIC is currently operating with a low-leveraged structure. It has access to financial institutions to support its treasury and lending operations. Going forward, the management, while continuing to prudently increase its advances book, would focus on non-fund based revenue stream. Given limited depth in participation towards development of long gestation projects, Development Financial institutions (DFIs) largely operate on turf common to commercial banks where limited outreach, low funding base, and high competition remain key challenges.

The ratings are dependent on the management's ability to sustain its financial profile while managing the associated risks. Management’s efforts to diversify its operations, finding a new niche for growth, while sustaining its profitability and at the same time upholding governance standards remains critical for the ratings.
About the Entity
Pak Kuwait Investment Company was established in March 1979 as an equally-owned joint venture between the governments of Pakistan (through State Bank of Pakistan) and Kuwait (through Kuwait Investment Authority). The company maintains a strategic investments book in different companies and funds. The earning profile of the company continues to take comfort from its healthy strategic investment portfolio, mainly 30% stake in Meezan Bank Limited (the country’s largest Islamic Bank) and Al-Meezan Investment Management Limited (leading AMC) that generates stable dividend income.

The BoD, including the Managing Director, comprises six members with equal representation of the joint venture partners. All directors of the company are non-executive with the exception of the MD, Mr. Mansur Khan. He has been associated with Pak Kuwait since Feb-14 and has over 30 years of varied experience in the banking and development sector. Pak Kuwait has an established structure with a relatively stable and experienced management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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