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The Pakistan Credit Rating Agency Limited

Date
12-Jun-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Sanna Khan
sanna.khan@pacra.com

+92-42-35869504
www.pacra.com
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Related Research

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PACRA Maintains Entity Ratings of Etimaad Engineering (Pvt.) Limited
 Rating Type Entity
Current
(12-Jun-2017)
Previous
(13-Jun-2016)
 Action Maintain Initial
 Long Term BB+ BB+
 Short Term A3 A3
 Outlook Stable Stable
 Rating Watch - -

Etimaad, engaged in providing engineering, procurement, construction and maintenance services, was established in 2007. The Company's profile draws strength from its experienced management team. Over the years, the sponsors established similar businesses mainly in Saudi Arabia (subsidiary) and Qatar (associate). Considering worsening market conditions due to geopolitical tensions in the region and the turmoil in oil prices, Etimaad decided to divest its shares and continued its focus in Pakistan. Etimaad has completed various projects in Pakistan and overseas. Etimaad has a reasonable universe of contracts on its plate, wherein margins are adequate. The performance of the company resonates with contracts in hand. The business strategy envisages enhanced focus on EPC in power sector; bagasse based power plants. The financial profile is stressed given limited cash flow stream and Etimaad’s need to avail bank guarantees for awarded projects. Herein, financial support of sponsors is key essential.
The sponsors demonstrated their commitment by operationally supporting the business and providing, i) fresh capital whenever the need arose, and ii) security and personal guarantees to obtain financial facilities and guarantees.
In the recent past, the management has undertaken several initiatives to streamline its business. These include, i) sale of foreign operations to increase focus on local business, ii) organizational restructuring, and iii) revamping of overall business model in line with market dynamics with a strategic focus on subcontracting. The management is confident that the financial profile will gradually gain strength through organic growth. At the same time, the management remains focused to settle any pending disputes and recover receivables to overcome deficit in certain projects where the company had incurred losses in the history. The success of the management's initiatives is critical for prosperity of the company. Meanwhile, strengthening of governance structure is important which can be achieved by induction of non-executive member(s) on the Board.
About the Entity
Established by a team of professionals in May 2007, Etimaad is an integrated engineering and contracting company. The company is engaged in providing turnkey, retrofit and de-bottlenecking solutions for power/oil & gas sector, project management, general industrial construction (Civil, Mechanical, E&I), shut-down and turnaround services.
Etimaad's three member board is chaired by Mr. Mazharuddin Ansari, who holds 38% shareholding, is a Chartered Mechanical Engineer with more than four decades of experience with renowned local and foreign organizations. Mr. Laeequddin Ansari, the founding Chairman, (along with his family) holds 43% shareholding. Mr. Farooq Hussain Mughal, President & CEO, is a fellow chartered accountant, holds 6% shareholding and is supported by a qualified team.

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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