PACRA

PACRA's Profile
PACRA was established in 1994 as a joint venture among IBCA Limited (the
international credit rating agency), International Finance
Corporation (IFC) and the Lahore Stock Exchange. The first credit rating
agency in Pakistan, PACRA is widely acknowledged for its professionalism and
integrity. To date, PACRA has completed well over a hundred ratings, including
major industrial corporates, financial institutions and debt instruments. In
addition to local ratings, PACRA has also successfully completed two
international rating assignments in collaboration with Fitch.
PACRA is geared to provide a full range of credit rating services. This includes the
rating of corporate entities and fixed income instruments. The ownership and
management structure of PACRA ensures complete independence from any
direct or indirect control of the Government, any private sector business group or
financial institution. A rating assigned by the rating committee, which includes
senior management of PACRA and the representatives of Fitch, reflects PACRA's
objectively formed opinion of credit risk. Other rating reviews carried out by
PACRA include 'individual' ratings of modarabas, mutual fund ratings and
Claims Paying Ability (CPA) ratings for insurance companies.
Mission Statement
"To be accepted as the leading credit rating agency in the country through highest
standards of professionalism and ethics"
The primary function of PACRA is to evaluate the capacity and willingness of a

corporate entity to honor its debt obligations. PACRA ratings reflect an
independent, professional and impartial assessment of the credit risk associated
with a particular debt instrument or a corporate entity. By providing a
measurement of risk, PACRA's ratings facilitate investors in making prudent
investment decisions after determining the acceptable rate of return at the given
risk level. However, regardless of the type of rating, it 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.
PACRA's shareholding pattern and composition of board of directors is:
Shareholding Pattern:
Fitch Ratings Limited 44.45%

International Finance
22.22%
Corporation (IFC)
Lahore Stock Exchange
33.33%
(LSE)
Board of Directors:
Mr. M. Khalil Mian Chairman
Managing Director /
Mr. Javed Masud
Chief Executive
Mr. Robin Monro-Davies Director
Mr. Samir Ahmed Director
Mr. Saeed A. Qureshi Director
Mr. Sajjad Hassan Director
Introduction of Fitch Ratings Limited

The European 'IBCA Limited' merged with American 'Fitch Investor
Services' in December 1997, to create an agency operating on a truly global
scale. In April 2000, Fitch IBCA acquired another major rating agency, Duff &
Phelps Credit Rating Co. (DCR), with the combined entity known as Fitch,
The International Rating Agency. With the most recent acquisition of
Thomson Bank Watch Fitch has joined the ranks of the S&P and Moodys,
and has thus emerged as one of the then largest rating agencies in the world.
Fitch, being PACRA's principal shareholder, remains committed to providing
technical assistance for the establishment and updating of operating systems at
PACRA and the training of its personnel in all aspects of the rating process. The
technical collaboration and institutional linkage with Fitch ensures continuing
support and guidance from its expertise which covers a complete range of rating
services, including sovereign ratings.
Fitch, with dual headquarters in New York and London, has emerged as the
third largest international rating agency with over 40 offices and combined
revenues of around US$ 260 million. Fitch is wholly owned by FIMILAC,
S.A., Paris. Fitch is recognized by regulatory authorities in all the world's major
financial markets, as well as numerous developing markets. It is one of four
agencies fully-recognised by the U.S. Securities and Exchange Commission as a
Nationally Recognised Statistical Rating Organization (NRSRO) and is also
recognised by the U.S. National Association of Insurance Commissioners (NAIC);
Department of Labour; and state bank, thrift and insurance regulators.
Additionally, it is recognised by the U.K. Securities and Futures Authority,
France's Ministry of Finance, the Hong Kong Monetary Authority, Japan's
Ministry of Finance, the Australian Securities Commission, and many others.
MANAGEMENT
M. Khalil Mian, Chairman is a fellow member of the Institute of the

Chartered Accountants of Pakistan and also of England and Wales. He is a
former senior partner of A.F. Ferguson & Co., Chartered Accountants. He has
also served as a member of the Privatization Commission and as Chairman,
Investment Corporation of Pakistan.
Javed Masud, Managing Director / Chief Executive has a Masters’ degree
in Finance & Economics from Boston University, USA. He is a former member of
the Corporate Law Authority and has held senior management positions in the
public sector including Senior Executive Vice President, Bankers Equity Limited.
He has also worked as a consultant to International Finance Corporation, the
World Bank and other international agencies, handling assignments in different
countries of Asia, Africa and Eastern Europe. Mr. Masud is currently a nominee
director on the Board of the Lahore Stock Exchange.
The team of professionals at PACRA consists of young and experienced

Financial Analysts who are either MBAs or chartered accountants. The analysts
possess diverse experience in the field of commercial and investment banking,
leasing, equity research etc. The new analysts are provided through extensive
workshops and close interaction with more experienced members of the team.
Rating manuals of Fitch help in clarifying conceptual issues concerning credit
rating. In addition, on continuing basis, analysts can also seek assistance from
sector specialists of Fitch. Technical skills of analysts are also sharpened by
working on rating assignments in collaboration with Fitch analysts. The analysts
keep themselves abreast with changes taking place in the macro economic
environment which is an integral part of the rating process. To facilitate
knowledge and skill acquisition, PACRA has developed its own library which is
continuously upgraded and includes an extensive range of professional
magazines and journals. Frequent in-house discussions and reviews on rating
related issues also facilitate continuous assimilation of analytical skills.
PACRA MILESTONES
Event Date
Signing of IFC/IBCA/LSE Joint Venture Agreement June 15, 1994
Incorporation of PACRA August 18, 1994
Establishment of Camp Office November 08, 1994
Notification of First Rating November 08, 1994
First Board Meeting November 20, 1994
IBCA/PACRA Technical Services Agreement January 15, 1995
Inauguration of PACRA's Office February 04, 1995
First Training Workshop May 28-31, 1995
PACRA's Recognition by Financial Times, London As A Local
October 1995
Rating Agency
Second Training Workshop November 19-29, 1995
Notification of 10th Rating December 26, 1995
Registration of PACRA with CLA February 14, 1996
PACRA's First International Consultancy March 14, 1996
Operation of Second Floor Office Premises August 01, 1996
Notification of 50th Rating April 10, 1997
Merger of IBCA with Fitch Inc., New York December 03, 1997
Notification of 100th Rating September 25, 1998
Merger of Fitch IBCA with Duff & Phelps Credit Rating
Company USA - Renamed as Fitch Ratings Limited, London April 12, 2000
& New York with major office in Chicago
Fitch Acquires ItalRating DCR (Italian Credit Rating Agency) July 28, 2000
Fitch Acquires 'Thomson Bankwatch Ratings Unit' from The
October 19, 2000
Thomson Corporation
Establishment of PACRA's branch office in Karachi March 30, 2002
PRODUCTS
Individual & Support Rating
Commercial Banks :
On a selective basis, PACRA shall also assign individual and support ratings to
commercial banks. These ratings would then be synthesized to generate standard
long and short term ratings. This arrangement is expected to ensure that
interested parties would be able to evaluate the reason only in some cases the
high long and short term ratings of a bank might not appear consistent with the
perceived financial strength of the bank.
Rating scales and definitions for support ratings and individual ratings are given
below:
Individual and Support Rating Scale

(Applicable to Commercial Banks)
Individual Ratings:
Fitch's Individual Ratings, which are internationally comparable, attempt to
assess how a bank would be viewed if it were entirely independent and could not
rely on external support. These ratings are designed to assess a bank's exposure
to, appetite for, and management of risk, and thus represent our view on the
likelihood that it would run into significant difficulties such that it would require
support. The principal factors we analyze to evaluate the bank and determine
these ratings include profitability and balance sheet integrity, franchise,
management, operating environment, and prospects. Consistency is an
important consideration.
A very strong bank. Characteristics may include outstanding

A profitability and balance sheet integrity, franchise, management,
operating environment, or prospects.
A strong bank. There are no major concerns regarding the bank.
Characteristics may include strong profitability and balance sheet
B
integrity, franchise, management, operating environment or
prospects.
An adequate bank which, however, possesses one or more
troublesome aspects. There may be some concerns regarding its
C
profitability and balance sheet integrity, franchise, management,
operating environment or prospects.
A bank which has weaknesses of internal and/or external origin.
There are concerns regarding its profitability and balance sheet
D
integrity, franchise, management, operating environment or
prospects.
A bank with very serious problems which either requires or is likely

E
to require external support.
Note:
In addition, we use gradations among these five ratings, i.e. A/B, B/C, C/D, and D/E.
Support Ratings:
The Support Ratings do not assess the quality of a bank. Rather, they are Fitch’s
assessment of whether the bank would receive support should this be necessary.
We emphasize that these ratings constitute Fitch’s opinions, although we may
discuss the principles underlying them with the supervisory authorities for their
comment or endorsement.
A bank for which there is a clear legal guarantee on the part of the
state OR a bank of such importance both internationally and
1 domestically that, in our opinion, support from the state would be
forthcoming, if necessary. The state in question must clearly be
prepared and able to support its principal banks.
A bank for which, in our opinion, state support would be
forthcoming, even in the absence of a legal guarantee. This could be,
2
for example, because of the bank's importance to the economy or its
historic relationship with the authorities.
A bank or bank holding company which has institutional owners of
3 sufficient reputation and possessing such resources that, in our
opinion, support would be forthcoming, if necessary.
4 A bank for which support is likely but not certain.
A bank, or bank holding company, for which support, although

5
possible, cannot be relied upon.
A 2, 3, 4, or 5 Support rating may be qualified by the suffix "T". This
indicates significant existing or potential transfer risk of economic
T
and/or political origin which might prevent support for foreign
currency creditors.
Entity Rating
Entity rating signifies the level of investment risk and the capacity and/or
willingness of an entity to meet its debt obligations to senior unsecured creditors.
The risk level is indicated by the long and short term ratings.
The benefits of a corporate entity rating are :
• To serve as a reliable credit risk indicator to banks / NBFIs.

• To assist depositors in selecting a financial institution given the return
offered and the risk profile as measured by credit rating.
• To provide flexibility to management of such entities to determine the rate

of return on debt instruments to be issued in future.
PACRA's Standard Rating Scale

Long Term Ratings Short Term Ratings
AAA: Highest credit quality. ‘AAA’ ratings A1+: Obligations supported by

denote the lowest expectation of credit risk. the highest capacity for timely
They are assigned only in case of repayment.
exceptionally strong capacity for timely
payment of financial commitments. This A1:. Obligations supported by a
capacity is highly unlikely to be adversely strong capacity for timely
affected by foreseeable events. repayment.
AA: Very high credit quality. ‘AA’ ratings A2: Obligations supported by a
denote a very low expectation of credit risk. satisfactory capacity for timely
They indicate very strong capacity for timely repayment, although such
payment of financial commitments. This capacity may be susceptible to
capacity is not significantly vulnerable to adverse changes in business,
foreseeable events. economic, or financial conditions.
‘A’ ratings denote a

A: High credit quality. A3: Obligations supported by an
low expectation of credit risk. The capacity adequate capacity for timely
for timely payment of financial repayment. Such capacity is more
commitments is considered strong. This susceptible to adverse changes in
capacity may, nevertheless, be more business, economic, or financial
vulnerable to changes in circumstances or in conditions than for obligations in
economic conditions than is the case for higher categories.
higher ratings.
B: Obligations for which the
BBB: Good credit quality. ‘BBB’ ratings capacity for timely repayment is
indicate that there is currently a low susceptible to adverse changes in
expectation of credit risk. The capacity for business, economic, or financial
timely payment of financial commitments is conditions.
considered adequate, but adverse changes in
circumstances and in economic conditions is C:Obligations for which there is
more likely to impair this capacity. This is an inadequate capacity to ensure
the lowest investment-grade category. timely repayment.
Speculative Grades: D: Obligations which have a high

risk of default or which are
BB: Speculative. ‘BB’ ratings indicate that currently in default.
there is a possibility of credit risk
developing, particularly as a result of
adverse economic change over time;
however, business or financial alternatives
may be available to allow financial
commitments to be met. Securities rated in
this category are not investment grade.
B: Highly speculative. ‘B’ ratings indicate

that significant credit risk is present, but a
limited margin of safety remains. Financial
commitments are currently being met;
however, capacity for continued payment is
contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C: High default risk. Default is a real

possibility. Capacity for meeting financial
commitments is solely reliant upon
sustained, favorable business or economic
developments. A ‘CC’ rating indicates that
default of some kind appears probable. ‘C’
ratings signal imminent default.
Notes:
1. A plus (+) or minus (-) may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the ‘AAA’ long-term rating category, to
categories below ‘CCC’, or to short-term ratings.
2. PACRA's ratings are an assessment of the credit standing of entities in Pakistan. They do not
take account of the potential transfer/convertibility risk that may exist for foreign currency
creditors.
Instrument Rating
Instrument rating covers all non-equity instruments including TFCs (long and
short term), convertibles, debentures, redeemable certificates. By indicating the
risk profile of the instrument, the assigned rating helps the issuer in deciding the
terms of the instrument while guiding the potential investors in investment
decisions. PACRA's rating process assumes that the return offered on such
instruments (expected profit, markup etc.) is in the nature of a fixed obligation.
Thus, in the case of TFCs, even though the issuing document refers to the return
as ‘expected profit’, PACRA, in consonance with the shared perception of the
issuer and the investor, treats this as a contractual obligation for purpose of
credit rating.
Structured Finance Rating
PACRA also has the expertise to rate debt instruments with features of structured
finance. Such instruments may have various credit enhancement features
designed for reducing the investment risk, the default risk or both. Structured
Finance ratings focus on evaluating specific cash flows identified for meeting the
repayment obligations, and also the security arrangements. PACRA's ratings are
contingent on examining all the underlying documentation that gives effect to the
proposed features of the instrument.
While all ratings follow an interactive process, the degree of interaction between
the client and PACRA is considerably more in such ratings than in standard
instrument ratings. If required by the client, PACRA would also be prepared to
assist the client in achieving the desired objectives.
Financial strength rating

. Modaraba Financial Strength Rating
In PACRA's rating process, whether for instrument rating or entity rating, the
starting point is the development of a risk profile of the issuer or the entity. This
initial assessment could be referred to as a generic or individual rating. This
individual rating is then used to generate the standard long and short term
ratings. This procedure applies to such entities where there is either an existing
debt obligation or the likelihood of acquiring such obligations in future.
These characteristics would not apply to Certificates of Musharika (COMs)

issued by Modarabas under the scheme approved by the CLA as these
certificates do not have any of the elements of debt. As the risk and return in
case of COM is linked to the profitability of the issuing Modaraba, it is more
akin to an equity instrument. As such, the standard scales and definitions for
the credit rating would not provide the requisite information to any investor in
COMs. PACRA has, therefore, decided that in the case of Modarabas, entity
rating would mean an individual rating and has evolved a set of definitions and
a specific individual rating scale for Modarabas. The individual rating is meant
to provide an indication of the risk / return profile of a Modaraba.
PACRA's Modaraba Financial Strength Rating Scale & Definitions
A Modaraba in an outstanding financial condition with a consistent record of above

A
average performance.
A Modaraba in a sound financial condition without significant problems. The Modaraba

B
performance has generally been in line with or better than that of its peers.
A Modaraba which has a satisfactory financial condition but possesses one or more
troublesome aspects giving rise to the possibility of risk developing, or which has generally
C failed to perform in line with its peers. Adverse changes in business or economic
conditions are more likely to lead to investment risk than in the case of higher rated
Modarabas.
A Modaraba whose financial condition and performance are below average. Adverse
D
changes in business or economic conditions are likely to lead to significant investment risk.
E A Modaraba with serious financial problems.

Notes:
• For individual ratings (applicable to Modarabas only) PACRA applies subscripts 1, 2
or 3 in each rating category from A to E.
• The subscript 1 indicates that the issue ranks in the higher end of its generic ratings
category; the subscript 2 indicates a mid-ranking; and the subscript 3 indicates the
issue ranks in the lower end of its generic rating category.
• PACRA's ratings are an assessment of the credit standing of entities in Pakistan.

They do not take account of the potential transfer/convertibility risk that may exist
for foreign currency creditors.
PACRA's rating 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.
II. Insurer Financial Strength Rating For Insurance

Companies
The insurer financial strength (IFS) rating represents an opinion of an issuer’s financial strength and
business continuity from a policy holder's prospective. The rating provides no guarantee against
default but offers a well researched opinion as to the likelihood of the issuer to fail to meet its policy
holders' obligations.
PACRA's Insurer Financial Strength Rating Scale & Definitions

Exceptionally Strong. Insurers assigned this highest rating are viewed as
possessing exceptionally strong capacity to meet policyholder and contract
AAA
obligations. For such companies, risk factors are minimal and the impact of any
adverse business and economic factors is expected to be extremely small.
Very Strong. Insurers are viewed as possessing very strong capacity to meet
AA policyholder and contract obligations. Risk factors are modest, and the impact of any
adverse business and economic factors is expected to be very small.
Strong. Insurers are viewed as possessing strong capacity to meet policyholder and
A contract obligations. Risk factors are moderate, and the impact of any adverse
business and economic factors is expected to be small.
Good. Insurers are viewed as possessing good capacity to meet policyholder and
BBB contract obligations. Risk factors are somewhat high, and the impact of any adverse
business and economic factors is expected to be material, yet manageable.
Moderately Weak. Insurers are viewed as moderately weak with an uncertain

capacity to meet policyholder and contract obligations. Though positive factors are
BB
present, overall risk factors are high, and the impact of any adverse business and
economic factors is expected to be significant.
Weak. Insurers are viewed as weak with a poor capacity to meet policyholder and
B contract obligations. Risk factors are very high, and the impact of any adverse
business and economic factors is expected to be very significant.
Very Weak. Insurers rated in any of these three categories are viewed as very weak
with a very poor capacity to meet policyholder and contract obligations. Risk factors
are extremely high, and the impact of any adverse business and economic factors is
CCC,CC,C
expected to be insurmountable. A 'CC' rating indicates that some form of insolvency
or liquidity impairment appears probable. A 'C' rating signals that insolvency or a
liquidity impairment appears imminent.
Very Weak. These ratings are assigned to insurers that have either failed to make
payments on their obligations in a timely manner, are deemed to be insolvent, or
have been subjected to some form of regulatory intervention. Within the DDD-D
range, those companies rated 'DDD' have the highest prospects for resumption of
business operations or, if liquidated or wound down, of having a vast majority of
DDD, DD, their obligations to policyholders and contract holders ultimately paid off, though on
D a delayed basis (with recoveries expected in the range of 90-100%). Those rated 'DD'
show a much lower likelihood of ultimately paying off material amounts of their
obligations in a liquidation or wind down scenario (in a range of 50-90%). Those
rated 'D' are ultimately expected to have very limited liquid assets available to fund
obligations, and therefore any ultimate payoffs would be quite modest (at under
50%).
Notes:
i)- A plus (+) or minus (-) may be appended to a rating to indicate the relative position of a credit
within the rating category. Such suffixes are not added to ratings in the ‘ AAA’ category or to ratings
below the ‘CCC' category.
ii)- PACRA's rating 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
Mutual Fund Ratings

Rating Methodology, Scale & Definitions
With the entry of the private sector in the floatation and management of mutual
funds and more recently open-ended mutual funds, this sector has acquired a
greater significance. As the economy – and consequently the stock market –
begins to revive, mutual funds are expected to play an increasing role in the
capital market. At the same time, with the expansion in the number of mutual
funds, investors would have greater options. It would be fairly straightforward
to base investment decisions on the historic performance of various mutual
funds. However, as future performance might not necessarily mirror the past,
any meaningful evaluation would have to factor in many critical variables of a
qualitative nature. This would include policies, strategies, systems and, above
all, the quality of management. Management evaluation would cover
professional skills and track record of the fund’s investment advisor for
determining, inter-alia, whether or not the fund’s investment policies and risk
tolerances will be adhered to, how the fund will respond to future opportunities
or stress situations, and the likelihood that the advisor will act in a fiduciary
manner in the best interest of the fund’s shareholders. However, unless all the
elements are analyzed and reduced to a common – and composite – yardstick of
rating, mutual fund shareholders and potential investors would find it difficult
to distinguish between the expected financial strength of different mutual funds.
2)- With the aforesaid objective in view, PACRA has developed a specific rating
scale and a set of corresponding definitions for mutual funds. It should,
however, be underscored that PACRA's mutual fund ratings would merely
provide an independent opinion on the financial strength of a mutual
fund. These ratings should not be construed as a recommendation to
purchase, sell or hold a security, in as much as they do not
comment on the security’s market price or suitability for a
particular investor.
3)- In developing the rating methodology for mutual funds, PACRA has
benefited from its operational history of over four years as a credit rating
agency. During this period, PACRA has rated well over a hundred corporate
entities including a large number in the financial sector: commercial and
investment banks, leasing companies, Modarabas, and brokerage houses.
However, as in the case of Modarabas, the potential users of mutual fund ratings
would be shareholders rather than creditors. Thus, the evaluation process would
enable PACRA to assign a rating rather than a credit rating.
4)- The specific aspects covered in PACRA's rating evaluation would include:
• Performance
• Consistency in performance
• Sources of revenue and degree of stability
• Fund portfolio – quality, diversification and liquidity
• Portfolio evaluation policy
• Size and growth
• Investment policies, strategies and procedures
• Level of professional expertise and experience of management personnel
• Process and efficiency of transactions
• Extent of access to independent research and effectiveness of utilizing the
information
• Internal control systems
• Breadth, depth, and timeliness of management information systems
• Financial standing of the advisor
• Composition of the fund’s board of trustees and directors
• System and quality of custodial service

Rating Scale and Definitions
A mutual fund showing a consistently outstanding
AAA(f) performance with very strong capacity to respond to future
opportunities or stress situations.
A mutual fund consistently outperforming its peers with
AA(f) strong capacity to respond to future opportunities or stress
situations.
A mutual fund with stable performance generally in line
A(f) with its peers with adequate capacity to respond to future
opportunities or stress situations.
A mutual fund with performance comparable to peers but
BBB(f) showing a relatively higher volatility and lower capacity to
respond to future opportunities or stress situations.
A mutual fund with a below average performance and
BB(f) limited capacity to respond to future opportunities or stress
situations.
Notes: 1). A plus (+) or minus (-) may be appended to a rating to
denote relative status within major rating categories.
2). PACRA's rating 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.
RATING ELEMENTS
PACRA's Rating Methodology
PACRA's process of due diligence covers a detailed evaluation of a number of key
variables. These are discussed respectively.
I. Industry Risk
Industry risk is measured by the strength of the industry within the economy and
relative to economic trends, both locally as well as internationally. This also
includes the ease or difficulty of entering the industry, the diversity of earning
base and role of regulation and legislation.
The specific issues covered include:
• Economic importance of the industry to the country.

• Potential for support.
• Employment significance.
• Industrial relations record.
• Significance of legislation: protective and harmful, relationship with
government.
• Maturity of the industry.
• International competition.
• Barriers to entry.
• Competitive situation domestically: monopoly, oligopoly, fragmentation.
• Nature of the industry: capital intensity, product lifespan, marketing
requirements.
• Cyclic factors: demand, supply, implications for price volatility.
• Industry cost and revenue structure: susceptibility to energy prices,
interest rate levels, government policies.
• Important developments and trends in the industry.
II. Market Position

Market position covers the company’s market share in its major activities and the
historical protection of its position and projected ability for the future. It also
covers the company’s historical operating margins and its ability to maintain and
improve them.
• Competitive position within the industry: size, market share & trend,
price-setting ability.
• Major product importance.
• Product lives and competition.
• Degree of product diversification.
• Significance of R&D expenditure and of new product development.
• Geographic diversity of sales and production.
• Significance of major customers.
• Dependence on major suppliers and access to alternatives.
• Marketing needs.
• Distribution network, control and susceptibility to external factors.
III. Ownership and Support

The ownership structure of the company, financial strength of the owners,
potential for support and other tangible benefits are covered in this area.
• Ownership of the entity.

• Relationship with owners, autonomy, control.
• Financial strength of owner (s).
• Potential for support or for funds withdrawals.
• Structure of ownership.
• Other benefits: access to technology, products.
• Access to capital markets.
IV. Management Evaluation

Management evaluation covers the record to date in operations and financial
terms, corporate goals, attitude to risk, control systems, experience and record
compared to peers.
• Record to date in financial terms.

• Corporate goals and outlook: aggressive stance, attitude to risk.
• Experience, background, credibility.
• Depth of management: key individuals, succession.
• Record compared with peers.
V. Accounting Quality
This area covers an overall review of the accounting policies employed and
consistency in their application. The specific issues covered include:
• Reporting & disclosure requirements.

• Auditors and audit opinions.
• Revenue recognition policies.
• Stock valuation policies.
• Fixed asset valuation methods.
• Goodwill & intangibles treatment.
• Undervalued assets, such as freehold property.
• Debt/equity hybrid instruments.
• Depreciation methods, rates, lives.
• Foreign currency treatment.
• Deferred taxation policy.
• Accounting for pension obligations.
• Treatment of finance costs.
• Contingent liabilities.
• Overall aggressiveness or prudence of accounting presentation.
• Unusual accounting policies, movements in reserves.
• Changes in accounting policies.
• Changes in group composition.
VI. Earnings
The key variables indicating the basic long term earning power of the company
are analyzed. Additionally, consistency and trend of core earnings, earnings mix
and capacity for internal growth are also covered.
• Consistency and trend of core earnings.

• Earnings mix by activity and geography.
• Exceptional and extraordinary items: non-recurring impacts on past
earnings levels.
• True earnings levels available for cash flow: equity accounting, restrictions
on profit repatriation.
• Internal growth versus acquired earnings.
• Profitability and protection measures.
• Profit margins.
• Interest & pre-tax coverage measures.
• Dividend cover, payment levels and future policy.
• Taxation situation: effective tax rate, specific relief, unutilized losses.
• Sufficiency of retained earnings to finance growth internally.
VII. Cash Flow

Relationship of cash flow to leverage and ability to internally meet all cash
requirements is evaluated. The volatility of cash flow over time and the impact of
seasonality on cash flow are also assessed.

• Adequacy of cash flow to maintain the operating capacity of the business:
working capital levels, replacement of fixed assets.
• Contribution from cash flow towards expansion: major capital spending
projects, acquisitions.
• Discretionary spending included in cash flow including advertising,
exploration, and research & development expenditure.
• Volatility of cash flow over time.
• Relationship between cash flow and total debt.
• Restrictions on cash flow: limits on repatriation, potential taxation effects,
access to dividends from subsidiaries.
• Liquidity levels and fluctuations: seasonality, sensitivities.
• Working capital management and measurements.
VIII. Capital and Debt Structure

The historical, present and projected gearing and leverage levels are analyzed.
Sensitivity analysis is also carried out by varying critical assumptions for
determining the cushion available for meeting future obligations in the event of
adverse changes in business conditions.
• Gearing (debt/equity) measures: historic, present and projected.

• Leverage (total liabilities/equity) measures: historic, present and
projected.
• Sensitivity analysis on projected levels.
• Seasonal variations in measures: core debt levels.
• Coverage measures on interest & leasing costs.
• Necessary adjustments to measure for off-balance sheet items: leased
plant/buildings, non-consolidated subsidiaries, guaranteed associates or
joint ventures.
• Appropriateness of capital structure for the business: over-reliance on
short term funding, sensitivity to interest rate changes.
• Nature of underlying assets: ability to realize without loss, attraction to
buyers in a forced sale, valuation methods and potential for moderation of
gearing/leverage measures.
• Debt structure: type, maturity, currency, service schedule, covenants,
security, default clauses.
IX. Funding and Flexibility

This area covers an evaluation of the company’s financing needs, plans and
alternatives and its flexibility to accomplish its financing program under stress
without impairing creditworthiness.

• Flexibility of planned financial needs: capital spending, dividend levels,
acquisitions.
• Ability to raise additional financing under duress.
• Back-up and standby lines of credit: periods and covenants of
underwriting facilities and committed lines, bank relationships generally.
• Ability to attract capital: shareholder make-up, access to equity markets.
• Capital commitments.
• Margin of safety in present and planned gearing/leverage levels.
• Asset make-up: nature of assets and potential for reductions or disposals
under stress, scalable units.
• Off-balance sheet assets and liabilities: goodwill or other intangibles
written off undervalued assets, pension under funding.
X. Additional Factors for Financial

Institutions
In the case of credit rating of financial institutions, some additional key factors
are:
• quality of the asset portfolio

• stability of earning
• sources and cost of funds
• capital adequacy and liquidity
• market environment and planning
• Prospects and contingent liabilities.
RATINGS
SECTORIAL CLASSIFICATION OF RATINGS NOTIFIED BY
PACRA
(As at December 12, 2002)
Sector No. Of Ratings
LEASING 45
MODARABA 35
COMMERCIAL BANKS 16
INVESTMENT BANKS 17
INVESTMENT COS./DFI' S/BROKERAGE
09
HOUSES
MUTUAL FUNDS 03
INSURANCE COMPANIES 05
AUTO & ALLIED 01
GLASS AND CERAMICS 01
COMMUNICATION 04
POLYESTER, YARN & FABRICS 03
CHEMICAL & PHARMACEUTICALS 04
TEXTILE 08
CEMENT 02
SUGAR AND ALLIED 04
FUEL & ENERGY 03
PAPER AND BOARD 04
ENGINEERING AND METAL 03
FERTILIZER 03
PUBLIC UTILITIES 07
MISCELLANEOUS 01
STATUS:
Total Number of Ratings Notified by

178
PACRA :
Entity Ratings : 116
Instrument Ratings : 062
Consolidated List of PACRA's Publicly Disseminated Ratings

(By Name)
(As At December 12, 2002)
Rating Assigned
Date of
Sr. Type of Notification Financial
Name Of Organization
No. Rating Strength /
Mutual
Long Short
(mm/dd/yyyy) Term Term
Fund
Rating
1. Al-Abbas Sugar Mills Limited Entity 04/19/2002 --- A- A2

Al-Baraka Islamic Bank (Pak
2. Entity 07/01/2002 --- A A1
Branches)
3. Al-Noor Sugar Mills Limited TFCs1 04/17/2002 --- BBB+ ---
Askari Commercial Bank
4. Entity 06/29/2002 --- AA A1+
Limited
5. Askari Leasing Limited Entity 04/25/2002 --- A+ A1
Atlas Investment Bank Limited
6. (Originally Issued By Atlas TFCs 09/27/2002 --- A ---
Lease)
Atlas Investment Bank Limited TFCs -
7. (Originally Issued By Atlas 2nd 09/27/2002 --- A ---
Lease) Tranche
8. Bank Al falah Limited Entity 06/11/2002 --- AA- A1+
9. Bank Al-Habib Limited Entity 06/25/2002 --- AA A1+
10. The Bank Of Punjab Entity 06/29/2002 --- A A1
11. BSJS Balanced Fund Limited MF2 02/28/2002 AA(f) --- ---
Crescent Investment Bank
12. Entity 07/25/2002 --- BBB- A3
Limited
Crescent Leasing Corporation
13. Entity 11/07/2002 --- A+ A1
Limited
14. TFCs 11/07/2002 --- AA- ---
Limited
Dawood Leasing Company
15. Entity 02/19/2002 --- A A1
Limited
16. TFCs 02/19/2002 --- A+ ---
Limited
TFCs -
17. 2nd 05/16/2002 --- A+ ---
Limited
Tranche
Engro Chemical Pakistan
18. Entity 05/30/2002 --- A+ A1
Limited
19. TFCs 05/30/2002 --- AA- ---
Limited
TFCs -
20. 2nd 05/30/2002 --- AA- ---
Limited
Tranche
21. First Grindlays Modaraba MFS3 01/15/2002 A2 --- ---
22. First Habib Modaraba MFS 02/04/2002 A3 --- ---
First International Investment
23. Entity 02/25/2002 --- A A1
Bank Limited
24. TFCs 02/25/2002 --- A+ ---
Bank Limited
25. TFCs-M 02/25/2002 --- A ---
Bank Limited
26. TFCs-R 02/25/2002 --- A ---
Bank Limited
27. First Punjab Modaraba MFS 05/03/2002 B2 --- ---
28. Gatron Industries Limited TFCs 05/08/2002 --- A+ ---
29. Gulistan Textile Mills Limited Entity 06/24/2002 --- BBB+ A2
30. Gulistan Textile Mills Limited TFCs 06/24/2002 --- A- ---
House Building Finance
31. Entity 11/18/2002 --- A A1
Corporation (HBFC)
International General Insurance
32. Company of Pakistan Limited IFS4 07/25/2002 AA --- ---
(IGI)
Jahangir Siddiqui & Company
33. Entity 12/02/2002 --- AA A1+
Limited
Jahangir Siddiqui Investment
34. Entity 02/20/2002 --- A- A2
Bank Limited
Khadim Ali shah Bukhari &
35. Entity 03/21/2002 --- A A1
Company Limited
Maple Leaf Cement Factory
36. TFCs 10/28/2002 --- A- ---
Limited
37. Metropolitan Bank Limited Entity 06/26/2002 --- AA+ A1+
Muslim Commercial Bank
38. Entity 09/10/2002 --- AA A1+
Limited
Muslim Insurance Company
39. IFS 09/19/2002 A --- ---
Limited
National Development Leasing
40. Entity 11/25/2002 --- A A1
Corporation Limited (NDLC)
41. TFCs 11/25/2002 --- A+ ---
National Investment (Unit) Trust
42. MF 10/02/2002 A(f) --- ---
- NIT
Network Leasing Corporation
43. Entity 12/11/2002 --- BBB A3
Limited
44. TFCs 12/11/2002 --- BBB+ ---
Limited
New Jubilee Insurance Company
45.
Limited (NJI)
IFS 04/02/2002 AA --- ---
46. Nishat Mills Limited TFCs 06/10/2002 --- A+ ---
47. Orix Leasing Pakistan Limited Entity 02/14/2002 --- AA- A1+
48. Orix Leasing Pakistan Limited TFCs 02/14/2002 --- AA ---
TFCs -
49. Orix Leasing Pakistan Limited 2nd 04/15/2002 --- AA ---
Tranche
50. Pacific Leasing Company Limited Entity 11/25/2002 --- BBB A3
51. Pacific Leasing Company Limited TFCs 11/25/2002 --- BBB+ ---
52. Packages Limited Entity 07/10/2002 --- AA- A1+
53. Packages Limited TFCs 07/10/2002 --- AA- ---
Pak-Apex Leasing Company
54. Entity 11/15/2002 --- BBB+ A2
Limited
55. TFCs 11/15/2002 --- A- ---
Limited
Pak-Arab Refinery Company
56. Entity 02/18/2002 --- AAA A1+
Limited (PARCO)
57. TFCs 02/18/2002 --- AAA ---
Limited (PARCO)
Pakistan Industrial Credit &
58. Investment Corporation Limited Entity 06/07/2002 --- A A1
(PICIC).
59. Pakistan PTA Limited TFCs-I 07/10/2002 --- A ---
60. Pakistan PTA Limited TFCs-II 07/10/2002 --- A ---
61. Prime Commercial Bank Limited Entity 07/01/2002 --- A A1
62. Security Papers Limited Entity 08/16/2002 --- AA A1+
63. Shahmurad Sugar Mills Limited TFCs 04/09/2002 --- BBB ---
64. Soneri Bank Limited Entity 06/29/2002 --- AA- A1+
Sui Southern Gas Company
65. TFCs 02/28/2002 --- AA ---
Limited (SSGC)
TFCs -
66. 2nd 02/28/2002 --- AA ---
Limited (SSGC)
Tranche
67. Tri-Pack Films Limited Entity 06/28/2002 --- A+ A1
Trust Investment Bank Limited
68. TFCs-I 01/10/2002 --- A- ---
(Originally Issued By PILCORP)
69. TFCs-II 01/10/2002 --- A- ---
Trust Leasing Corporation
70. Entity 04/09/2002 --- BBB+ A2
Limited
71. Union Bank Limited Entity 07/10/2001 --- A- A2
72. Union Leasing Limited Entity 10/21/2002 --- A- A1
73. Union Leasing Limited TFCs 10/21/2002 --- A ---
74. Unit Trust Of Pakistan MF 02/21/2002 AA(f) --- ---
WorldCall Communications
75. Entity 05/14/2002 --- A+ A1
Limited
76. TFCs 06/20/2002 --- AA- ---
Limited
1
Term Finance Certificates
2
Mutual Fund Rating
3
Modaraba Financial Strength
4 Insurer Financial Strength
Consolidated List of PACRA's Publicly Disseminated Ratings

(Sector-Wise)
Date of
Rating Assigned
No. Rating Strength
/Mutual Long Term
Short
(mm/dd/yyyy) Term
Fund
Rating
(I) FINANCIAL SECTOR
BANKING COMMERCIAL
1. Askari Commercial Bank Limited Entity 06/29/2002 --- AA A1+
Al Baraka Islamic Bank (Pak
2. Entity 07/01/2002 --- A A1
Branches)
3. Bank Alfalah Limited Entity 06/11/2002 --- AA- A1+
7. Entity 09/10/2002 --- AA A1+
Limited
BANKING INVESTMENT
1. (Originally Issued By Atlas TFCs1 09/27/2002 --- A ---
Lease)
2. (Originally Issued By Atlas TFCs -2nd 09/27/2002 --- A ---
Tranche
Lease)
3. Entity 07/25/2002 --- BBB- A3
Limited
4. Entity 02/25/2002 --- A A1
Bank Limited
5. TFCs 02/25/2002 --- A+ ---
Bank Limited
6. TFCs-M 02/25/2002 --- A ---
Bank Limited
7. TFCs-R 02/25/2002 --- A ---
Bank Limited
8. Entity 02/20/2002 --- A- A2
Bank Limited
9. TFCs-I 01/10/2002 --- A- ---
10. TFCs-II 01/10/2002 --- A- ---
DFIs/INVESTMENT COMPANIES /MUTUAL FUNDS

House Building Finance
2. Entity 11/18/2002 --- A A1
Corporation (HBFC)
3. Entity 12/02/2002 --- AA A1+
Limited
Khadim Ali Shah Bukhari &
4. Entity 03/21/2002 --- A A1
Company Limited
5. MF 10/02/2002 A(f) --- ---
- NIT
(PICIC)
INSURANCE COMPANIES
(IGI)
2. IFS 09/19/2002 A --- ---
Limited
3. IFS 04/02/2002 AA --- ---
Limited (NJI)
LEASING COMPANIES
2. Entity 11/07/2002 --- A+ A1
Limited
3. TFCs 11/07/2002 --- AA- ---
Limited
4. Entity 02/19/2002 --- A A1
Limited
5. TFCs 02/19/2002 --- A+ ---
Limited
Dawood Leasing Company TFCs -2nd 05/16/2002
6. --- A+ ---
Limited Tranche

7. Entity 11/25/2002 --- A+ A1
8. TFCs 11/25/2002 --- AA- ---
9. Entity 12/11/2002 --- BBB A3
Limited
10. TFCs 12/11/2002 --- BBB+ ---
Limited
12. Orix Leasing Pakistan Limited TFCs 02/14/2002 --- AA ---
13. Orix Leasing Pakistan Limited TFCs -2nd 04/15/2002 --- AA ---
Tranche
Pacific Leasing Company
14. Entity 11/25/2002 --- BBB A3
Limited
Pacific Leasing Company
15. TFCs 11/25/2002 --- BBB+ ---
Limited
16. Entity 11/15/2002 --- BBB+ A2
Limited
17. TFCs 11/15/2002 --- A- ---
Limited
18. Entity 04/09/2002 --- BBB+ A2
Limited
20. Union Leasing Limited TFCs 10/21/2002 --- A ---
MODARABAS
(II) INDUSTRIAL CORPORATES

2. Al-Noor Sugar Mills Limited TFCs 04/17/2002 --- BBB+ ---
3. Entity 05/30/2002 --- A+ A1
Limited
4. TFCs 05/30/2002 --- AA- ---
Limited
Engro Chemical Pakistan TFCs -2nd 05/30/2002
5. --- AA- ---
Limited Tranche
6. Gatron Industries Limited TFCs 05/08/2002 --- A+ ---

8. Gulistan Textile Mills Limited TFCs 06/24/2002 --- A- ---
Maple Leaf Cement Factory
9. TFCs 10/28/2002 --- A- ---
Limited
10. Nishat Mills Limited TFCs 06/10/2002 --- A+ ---
12. Packages Limited TFCs 07/10/2002 --- AA- ---
13. Entity 02/18/2002 --- AAA A1+
Limited (PARCO)
14. TFCs 02/18/2002 --- AAA ---
Limited (PARCO)
15. Pakistan PTA Limited TFCs-I 07/10/2002 --- A ---
16. Pakistan PTA Limited TFCs-II 07/10/2002 --- A ---
18. Shahmurad Sugar Mills Limited TFCs 04/09/2002 --- BBB ---
19. TFCs 02/28/2002 --- AA ---
Limited (SSGC)
Sui Southern Gas Company TFCs - 2nd 02/28/2002
20. --- AA ---
Limited (SSGC) Tranche
22. Entity 05/14/2002 --- A+ A1
Limited
23. TFCs 06/20/2002 --- AA- ---
Limited
1
2
Mutual Fund Rating
3
Insurer Financial Strength
4
Consolidated List of PACRA's Publicly Disseminated Entity Ratings

(Sector-Wise)
Date of
Rating Assigned
No. Rating Strength /
Mutual
Long Short
Fund
Rating

BANKING COMMERCIAL
1. Askari Commercial Bank Limited Entity 06/29/2002 --- AA A1+
Al Baraka Islamic Bank (Pak
2. Entity 07/01/2002 --- A A1
Branches)
3. Bank Alfalah Limited Entity 06/11/2002 --- AA- A1+
7. Entity 09/10/2002 --- AA A1+
Limited
BANKING INVESTMENT
1. Entity 07/25/2002 --- BBB- A3
Limited
2. Entity 02/25/2002 --- A A1
Bank Limited
3. Entity 02/20/2002 --- A- A2
Bank Limited
DFIs/INVESTMENT COMPANIES/MUTUAL FUNDS

2. House Building Finance Entity 11/18/2002 --- A A1
Corporation (HBFC)
3. Entity 12/02/2002 --- AA A1+
Limited
Khadim Ali Shah Bukhari &
4. Entity 03/21/2002 --- A A1
Company Limited
5. MF 10/02/2002 A(f) --- ---
- NIT
(PICIC)
INSURANCE COMPANIES
(IGI)
2. IFS 09/19/2002 A --- ---
Limited
3. IFS 04/02/2002 AA --- ---
Limited (NJI)
LEASING COMPANIES
2. Entity 11/07/2002 --- A+ A1
Limited
3. Entity 02/19/2002 --- A A1
Limited
4. Entity 11/25/2002 --- A A1
5. Entity 12/11/2002 --- BBB A3
Limited
7. Pacific Leasing Company Limited Entity 11/25/2002 --- BBB A3
8. Entity 11/15/2002 --- BBB+ A2
Limited
9. Entity 04/09/2002 --- BBB+ A2
Limited
MODARABAS
(II) INDUSTRIAL CORPORATE
2. Engro Chemical Pakistan Limited Entity 05/30/2002 --- A+ A1
5. Entity 02/18/2002 --- AAA A1+
Limited (PARCO)
8. Entity 05/14/2002 --- A+ A1
Limited
1
Mutual Fund Rating
2
Insurer Financial Strength
3
Consolidated List of PACRA's Publicly Disseminated Instrument

Ratings (Sector-Wise)
Date of Rating
Sr. Type of Notification Assigned
No. Rating Long Short
BANKING INVESTMENT
1. TFCs1 09/27/2002 A ---
(Originally Issued By Atlas Lease)
2. TFCs - 2nd Tranche 09/27/2002 A ---
(Originally Issued By Atlas Lease)
First International Investment Bank
3. TFCs 02/25/2002 A+ ---
Limited
4. TFCs-M 02/25/2002 A ---
Limited
5. TFCs-R 02/25/2002 A ---
Limited
6. TFCs-I 01/10/2002 A- ---
7. TFCs-II 01/10/2002 A- ---
LEASING COMPANIES
1. TFCs 11/07/2002 AA- ---
Limited
2. Dawood Leasing Company Limited TFCs 02/19/2002 A+ ---
3. Dawood Leasing Company Limited TFCs - 2nd 05/16/2002 A+ ---
Tranche
4. TFCs 11/25/2002 A+ ---
5. Network Leasing Corporation Limited TFCs 12/11/2002 BBB+ ---
6. Orix Leasing Pakistan Limited TFCs 02/14/2002 AA ---
TFCs - 2nd
7. Orix Leasing Pakistan Limited 04/15/2002 AA ---
Tranche
8. Pacific Leasing Company Limited TFCs 11/25/2002 BBB+ ---
9. Pak-Apex Leasing Company Limited TFCs 11/15/2002 A- ---
10. Union Leasing Limited TFCs 10/21/2002 A ---
(II) INDUSTRIAL CORPORATE

1. Al-Noor Sugar Mills Limited TFCs 04/17/2002 BBB+ ---
2. Engro Chemical Pakistan Limited TFCs 05/30/2002 AA- ---
TFCs - 2nd
3. Engro Chemical Pakistan Limited 05/30/2002 AA- ---
Tranche
4. Gatron Industries Limited TFCs 05/08/2002 A+ ---
5. Gulistan Textile Mills Limited TFCs 06/24/2002 A- ---
6. Maple Leaf Cement Factory Limited TFCs 10/28/2002 A- ---
7. Nishat Mills Limited TFCs 06/10/2002 A+ ---
8. Packages Limited TFCs 07/10/2002 AA- ---
Pak-Arab Refinery Company Ltd.
9. TFCs 02/18/2002 AAA ---
(PARCO)
10. Pakistan PTA Limited TFCs-I 07/10/2002 A ---
11. Pakistan PTA Limited TFCs-II 07/10/2002 A ---
12. Shahmurad Sugar Mills Limited TFCs 04/09/2002 BBB ---
Sui Southern Gas Company Limited
13. TFCs 02/28/2002 AA ---
(SSGC)
Sui Southern Gas Company Limited TFCs - 2nd
14. 02/28/2002 AA ---
(SSGC) Tranche
15. WorldCall Communications Limited TFCs 06/20/2002 AA- ---
1
International Exposure
International Rating Assignments
PACRA's has also lent its professional expertise and technical assistance to
other Fitch affiliates. To date, PACRA has successfully completed rating
assignments in Hong Kong, Oman and Egypt, involving credit rating of various
financial institutions as well as industrial corporate.
Consultancy Assignments
Although credit rating would continue to be PACRA’s core activity, it has also
entered the field of consultancy. Given PACRA’s extensive exposure to rating
entities in the financial sector, it is imminently qualified for handling any
consultancy assignment related to the sector. This competitive edge has been
duly recognized by international organizations as reflected in the following
assignments completed so for various international clients.
YEAR SUBJECT CLIENT
Pakistan Bond Market Study Washington Asset Management
1996-1997
Inc. Washington D.C. USA.
1996-1997 Study on NBFI Sector In Bangladesh The World Bank
Evaluation of FMO's Contribution To Netherlands Economic Institute,

1996-1997 Development through financial intermediaries Rotterdam The Netherlands
in Pakistan during 1985-1995
1997-1998 Appraisal Of Network Leasing Company The World Bank
1997-1998 Survey of Leasing Sector In Pakistan IFC
1997-1998 NBFI Project in Bangladesh The World Bank

Netherlands Development
1997-1998 Study on Pakistan's Financial Sector
Finance Company.
1998- Evaluation of merger of Ibrahim Leasing and
Ibrahim Group
1999 First Ibrahim Modaraba
PACRA's Rating Process

Rating is an interactive process relying primarily in gathering information from
the issuer and supplementing it with strategic information obtained from outside
independent sources. The entire process is aimed at evaluating (a) Financial
Risk and (b) Business Risk Information with regard to (a) is generally
provided by the company requesting for rating and, only when necessary, such
information is corroborated or complemented by information from other sources.
However, comprehensive information with regard to (b) is not readily available
from any identifiable source. PACRA has, therefore, proceeded to develop its own
database consisting of economic data by industrial sub-sectors. Additionally, it
continuously monitors macroeconomic developments and important government
policy changes (like fiscal adjustments) for determining their likely impact on
specific sectors and companies.
The sequence of the rating process is depicted below:
Note: PACRA commits to complete the rating process within four working weeks of receiving all
the required information from the client company.
PACRA's Fee Structure
ENTITY RATING
• MODARABAS
Equity up to Rs. 100 million Rs. 200,000

Equity over Rs. 100 million Rs. 200,000 + 15 basis points of equity, (based on the latest
audited accounts), in excess of Rs. 100 million, subject to a
maximum of Rs. 500,000.
(Note: EQUITY comprises paid-up capital plus reserves and un-appropriated profits at the time of
receiving rating mandate.)
• LEASING COMPANIES
5 basis points of total assets at the time of receiving the Mandate subject to a minimum of
Rs.250,000 and a maximum of Rs.1,000,000.
• INDUSTRIAL CORPORATE
The initial credit rating fee would be quoted on a case to case basis after ascertaining the scope of
work. However, the minimum fee would be Rs.300,000.
• INVESTMENT BANKS / COMMERCIAL BANKS / DFIs / SECURITY FIRMS
The initial credit rating fee would be quoted on a case to case basis after ascertaining the scope of
work. However, the minimum fee for each category would be as under:
Investment Banks/Security Firms/Housing Finance Companies
Minimum Rs. 300,000
Commercial Banks/DFIs
Minimum Rs. 500,000
• INSURER FINANCIAL STRENGTH (IFS) RATING OF INSURANCE COMPANIES
10 basis points of Gross Premium written at the time of receiving the Mandate subject to a
minimum of Rs.250,000.
ISSUE / INSTRUMENT RATING
a) Long Term Corporate Debt Instruments (TFCs etc.)
Initial Rating Fee 15 basis points of the total principal amount of the issue
subject to a minimum of Rs.200,000 and maximum of Rs.
2.5 million.
Annual Updating / Surveillance Fee 10 basis points of the original amount of issue, subject to a
minimum of Rs. 100,000 and maximum of Rs. 2.5 million.
b) Short Term Corporate Debt Instruments

(Short-Term TFCs, Commercial Paper etc.)
Initial Rating Fee 15 basis points of the principal amount of issue, subject to a
minimum of Rs.100,000.
• Fifty percent (50%) of the rating fee is to be paid in advance at the time PACRA is given formal
mandate to initiate the rating process with the balance payable on notification of rating.
• In addition to the aforementioned professional fees, expenses incurred in connection with the
assignment on travel, boarding and lodging etc. will be billed at actual.
• If any company after having been rated as an entity intends to issue any debt instrument, it
shall be required to pay @ 10 basis points of the size of the issue.
• The updating fee for entity ratings would generally vary from 40% to 60% of the initial rating
fee, subject to a minimum of Rs. 100,000.
• Pacra’s fee structure is subject to revision. The revision whenever considered necessary shall
become effective from 1st July of the year. The revision will not affect fee for assignments
accepted prior to the date of revision.
• PACRA’s fees are exclusive of any excise duty, surcharge etc. that may be levied by the
government.
• all cheques / drafts are payable to : the Pakistan credit rating agency (private) ltd.
* Where the instrument has features of structured finance or securitisation, an additional fee of 20%
would be payable

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PACRA's Profile

The primary function of PACRA is to evaluate the capacity and willingness of a

PACRA's shareholding pattern and composition of board of directors is:

Fitch Ratings Limited 44.45%

Mr. M. Khalil Mian Chairman

Mr. Robin Monro-Davies Director

Mr. Samir Ahmed Director

Mr. Saeed A. Qureshi Director

Mr. Sajjad Hassan Director

Introduction of Fitch Ratings Limited

M. Khalil Mian, Chairman is a fellow member of the Institute of the

The team of professionals at PACRA consists of young and experienced

Individual and Support Rating Scale

A very strong bank. Characteristics may include outstanding

A bank with very serious problems which either requires or is likely

4 A bank for which support is likely but not certain.

A bank, or bank holding company, for which support, although

The benefits of a corporate entity rating are :

• To serve as a reliable credit risk indicator to banks / NBFIs.

• To provide flexibility to management of such entities to determine the rate

PACRA's Standard Rating Scale

AAA: Highest credit quality. ‘AAA’ ratings A1+: Obligations supported by

‘A’ ratings denote a

Speculative Grades: D: Obligations which have a high

B: Highly speculative. ‘B’ ratings indicate

CCC, CC, C: High default risk. Default is a real

Financial strength rating

These characteristics would not apply to Certificates of Musharika (COMs)

A Modaraba in an outstanding financial condition with a consistent record of above

A Modaraba in a sound financial condition without significant problems. The Modaraba

E A Modaraba with serious financial problems.

• PACRA's ratings are an assessment of the credit standing of entities in Pakistan.

II. Insurer Financial Strength Rating For Insurance

PACRA's Insurer Financial Strength Rating Scale & Definitions

Moderately Weak. Insurers are viewed as moderately weak with an uncertain

Mutual Fund Ratings

• System and quality of custodial service

2). PACRA's rating is not a recommendation to purchase,

The specific issues covered include:

• Economic importance of the industry to the country.

II. Market Position

The specific issues covered include:

III. Ownership and Support

The specific issues covered include:

• Ownership of the entity.

IV. Management Evaluation

The specific issues covered include:

• Record to date in financial terms.

• Reporting & disclosure requirements.

The specific issues covered include:

• Consistency and trend of core earnings.

VII. Cash Flow

The specific issues covered include:

VIII. Capital and Debt Structure

The specific issues covered include:

• Gearing (debt/equity) measures: historic, present and projected.

IX. Funding and Flexibility

The specific issues covered include:

X. Additional Factors for Financial

• quality of the asset portfolio

Total Number of Ratings Notified by

Consolidated List of PACRA's Publicly Disseminated Ratings

1. Al-Abbas Sugar Mills Limited Entity 04/19/2002 --- A- A2