Transmission of Quarterly Accounts for the period ended March 31 2023

Quarterly Accounts

For the nine months period ended March 31, 2023

HabibMetro

Modaraba Management

Corporate Information

MODARABA MANAGEMENT COMPANY

Habib Metropolitan Modaraba Management Company (Private) Limited

First Habib Modaraba

A n I s l a m i c F i n a n c i a l I n s t i t u t i o n

Directors' Report

On behalf of the Board of Directors, it is our great pleasure to present quarterly accounts for the period ended 31st March, 2023.

Business Operation

Performance of 3rd quarter of current financial year remained under pressure. Again in this quarter targets of disbursements and enhancement of financing book was not achieved as per budgeted targets due to continuous slowdown of businesses with economic challenges. Total disbursement for nine month period is Rs.7.449 billion as compared to disbursement of Rs.8.041 billion in same period of previous year. The other reason of low disbursements was non-availability of booking of motor vehicles due to import restrictions and high lending rates. The issues have further restricted corporate and individual customers to engage in further financing and assets booking.

Economic Outlook

There is no positive outcome on economic fronts since our last report of February, 2023, rather misery of businesses has further aggravated. At present businesses are suffering with high cost of doing businesses, supply chain disruption due to non- availability of imported raw materials, high cost of borrowings and political instability. Recently, State Bank of Pakistan (SBP) has further raised policy rate to 21%, increase of around 4% since January this year. According to latest Monetary Policy Statement of SBP, the inflation in March 2023 rose to 35.4 percent, and is expected to remain high in the near term. According to statistics, the food group commands significant weight in rising of inflation. Presently, Pakistan has highest rates of inflation as compared to other countries of region such as India and Bangladesh. External financial vulnerability due to low foreign reserves leading towards huge depreciation of Pak rupees is also one of reasons of exorbitant inflation.

Currently government has managed current account deficit due to curb on imports. However, import restriction has slowed down economic activities to a large extent which impact industries and layoff of workers. The World Bank (WB) and the Asian Development Bank (ADB) have released economic projections of Pakistan and stated that currently Pakistan passing through with huge financial stress with worst inflation numbers. The both institution cut down their earlier growth projection from 2% to between 0.4 to 0.6 percent of FY 2023. The deal with International Monetary Fund (IMF) for extended funded facility is still not finalized. According to report, the fund is looking forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th review of the Extended Fund Facility (EFF) program. Till some positive outcome, our rupee remains in stress which ultimately lead towards further depreciation of rupee.

Status of merger of Habib Metro Modaraba

Merger proceedings of Habib Metro Modaraba with First Habib Modaraba have been completed and assets and liabilities have been amalgamated with FHM. The financials of FHM for the period ended 31st March, 2023 is reflecting financials of merged entity.

Conclusion

Presently, we do not see any positive sign in improvement of key economic indicators in next few months till some political stability. Businesses are continuously facing issues of pressures of high cost doing of business. Macroeconomic fundamentals are also unstable due to tight monetary policy, fiscal and regulatory adjustment which have squeezed national output, increased pressure on cost and slowed down the GDP growth. The present government faces tough economic challenges towards reviving of current state of economic affairs. Required structural transformations are needed in Pakistan's economic system for future sustainability.

Keeping in view prevailing economic challenges, we expect slow moving business activities in near future. The said situation is also impacting timely repayment of borrowed facilities by the businesses. We are also continuously facing re-pricing risks under rising lending rate scenario and rising cost of doing businesses which have squeezed cash generation ability of customers. Keeping in view of present business circumstances we are cautiously moving forward in order to make sure long term sustainability.

4 QUARTERLY REPORT 2023

HabibMetro

Modaraba Management

Acknowledgment

We would like to express our sincere thanks and gratitude for the continued support and guidance provided by Securities & Exchange Commission of Pakistan and Registrar Modaraba, customers of the Modaraba for their patronage and Certificate holders, investors who have remained committed to FHM. We also appreciate dedication, high level of professionalism and hard work of employees of FHM for smooth operations and achieving satisfactory results in extremely difficult business environment.

For and on behalf of Board of Directors

QUARTERLY REPORT 2023 5