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The Pakistan Credit Rating Agency Limited

Date
18-Dec-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Saliha Sajid
saliha.sajid@pacra.com

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

  • Methodology | Non-Banking Finance Companies (Jan 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Modaraba & NBFCs (Mar 17) [View]
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PACRA Maintains Rating Watch on Entity Ratings of IGI Investment Bank Limited
 Rating Type Entity
Current
(18-Dec-2017)
Previous
(21-Jun-2017)
 Action Maintain Maintain
 Long Term BBB- BBB-
 Short Term A3 A3
 Outlook Developing Developing
 Rating Watch RatingWatch -

The sponsor of IGI group intends to redesign the overall corporate structure of its multiple businesses primarily in the area of financial services. Formation of a Group financial services holding company is proposed. A two-step transaction is envisaged involving i) merger of IGI Investment Bank Limited (IGI IBL) with and into IGI Insurance Company (IGI) and ii) demerger of IGI Insurance to form a Holding Company having separate subsidiaries for different business lines – General Insurance, Life Insurance, Brokerage and Investments. In this regard, the board of directors of IGI Investment Bank Limited (IGI IBL) made two important decisions: (i) cancellation of the previously proposed merger of IGI Finex Securities Limited, wholly owned subsidiary of IGI IBL, with and in to the IGI IBL, (ii) approval of IGI IBL’s merger with and into IGI Insurance Limited – having 42% stake in IGI IBL. The merger would be under share swap arrangement. Shareholders of IGI IBL will be issued IGI’s shares according to a swap ratio of 1:92. A petition for the approval of the scheme of amalgamation and arrangement has been filed in the Honorable High Court of Sindh at Karachi which is pending approval. There was no challenge, the court has reserved the order by Aug 2017 and yet to be announced; likely by end Dec 2017. On standalone basis, IGI IBL maintains a subdued operational profile. Business operations are squeezed. However, the bank continued to generate limited revenues from non-fund based segments. Meanwhile, sponsor’s support remained intact.


Entity ratings of IGI IBL would be withdrawn when the merger is finalized and IGI IBL seizes to exist as an entity. PACRA would continue to monitor these developments and the ratings would be updated accordingly.
About the Entity
IGI IBL is majority owned by the Packages group (49%), directly by individuals and through different group companies, mainly IGI Insurance Limited (42%). Packages group is a well-diversified group with interests in insurance, real estate, packaging, and consumer segments. IGI Finex Securities Limited, provides brokerage services to all investors across the spectrum including retail, institutional and foreign.

IGI Insurance Limited (IGI), established in 1953, is engaged in offering general insurance services. IGI, listed on Pakistan Stock Exchange, is the flagship company of the Packages Group. Currently, the company, in addition to underwriting insurance business, acts as anInvestments-holding company of the group.

The Board of Directors of IGI IBL comprises seven members. All members with the exception of CEO, are non-executive. Amongst the non-executive directors, three represent the Packages group, while the others are independent. Mr. Raza Hussain Rizvi, a Chartered Accountant by profession, is the CEO of the Bank. Mr. Rizvi has been associated with IGI group for last six years in various roles. The management team carries adequate experience profile. IGI IBL has not announced its financial results since Dec 16.
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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