VIS Reaffirms Entity Ratings of Sindh Modaraba - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- June 30, 2020 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sindh Modaraba (SM) at 'A+/A-1' (Single A Plus/A-One). The long-term rating of 'A+' signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of 'A-1' depicts high certainty of timely payment where liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is 'Stable'. Previous rating action was announced on February 22, 2019.

The assigned ratings of Sindh Modaraba (SM) derive strength from its indirect ownership by the Government of Sindh (GoS) through Sindh Modaraba Management Limited (SMML). Strong sponsor support has been demonstrated through both financial and technical assistance. The assigned ratings also incorporate satisfactory corporate governance framework, improving profitability indicators, and healthy capitalization indicators and liquidity profile.

Financing portfolio witnessed sizeable growth in 9M'FY20 vis-a-vis the corresponding period in the previous year primarily on account of acquisition of new clients. Concentration in portfolio remains due to selective disbursement strategy. Asset quality indicators are sound given the management's focus on maintaining a clean portfolio. However, the impact of COVID-19 on the economy would make operating dynamics of the modarabas challenging going forward. Regulatory relief measure granted by SECP to allow for delay of principal payment for one year to clients is expected to delay the impact of prevailing headwinds on portfolio asset quality indicators.

However, exposure of SM to credit risk may be elevated due to significant impact of COVID-19 on already weak macroeconomic indicators. Given the economic...