Press Release

VIS Reaffirms Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited

Karachi, June 09, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The medium to long-term rating of ‘AA+’ denotes high credit quality, with strong protection factors. Moreover, risk factors are modest but may vary slightly with possible changes in the economy. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on May 31, 2019.

The assigned ratings take into account strong shareholders’ profile, with two sovereigns, Government of Pakistan (GoP) and Kingdom of Saudi Arabia (KSA), having an equal stake in the company under the terms of a joint venture agreement. KSA has outstanding ratings of ‘A-/A-2’ from an international credit rating agency.

In view of challenging economic conditions, a conservative approach was adopted in terms of disbursement during FY19 which remained low compared to last year and FY19 target. The concentration of top-10 exposures in gross advances portfolio remained high and asset quality indicators deteriorated mainly on account of fresh infection in food sector, resulting in higher gross and net infection. Infection levels are expected to remain largely at the current level during FY20, mainly on account of regulatory relief related to COVID-19 pandemic; nevertheless maintenance of asset quality amongst fresh disbursements is considered important in sustaining risk profile of the institution.

Investment portfolio was enhanced significantly by building fresh exposure in Government Securities, mainly in floating rate Pakistan Investment Bonds (PIBs). Net investment in TFCs also increased on the back of fresh exposure in debt instruments of an Independent Power Producer. Exposure in listed equities as a percentage of total equity was well-below the approved limit. Saudi Pak exhibited growth in core income due to higher return on investment portfolio as well as increase in dividend and rental income. Overall profitability indicators remained suppressed during FY19 as the institution booked net provision vis-à-vis a net reversal in the corresponding period. As of April 30, 2020, Saudi Pak has reasonable cushion available in terms of surplus on its equity portfolio. Markup spread was recorded lower due to higher cost of funding as a result of higher interest rate and change in the borrowing mix. Given declining interest rate scenario, markup spreads are projected to improve during FY20, mainly on the back of higher net return expected on PIBs portfolio financed through shorter maturity repurchase agreements.

Overall liquidity profile of the institution weakened with the decline in liquid assets (adjusted for saleable PIBs repo) as a percentage of total borrowings & deposits. Net NPLs (including TFCs) as a portion of Tier-1 capital were reported higher due to stagnant equity base and higher incidence in infection during the year. Capital Adequacy Ratio remained well-above the minimum regulatory requirement. Focus on core operations of financing would remain important, going forward.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at

Faryal Faheem Ahmed
Deputy CEO

Applicable rating criterion: Government Supported Entities (June, 2016)

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