Pakistan Credit Rating Agency Limited assigns entity ratings to Etimaad Engineering (Private) Limited

Lahore, June 14, 2016 (PPI-OT):The Pakistan Credit Rating Agency Limited (PACRA) has assigned a long-term entity rating of “BB+” (Double B Plus) and short-term rating of “A3” (A three) to Etimaad Engineering (Private) Limited (Etimaad). These ratings denote a possibility of credit risk developing, particularly as a result of adverse economic or business changes over time; however business or financial alternatives may be available to allow financial commitments to be met.

Etimaad, engaged in providing engineering, procurement, construction and maintenance services, was established in 2007. The Company’s profile draws strength from its quality 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 faced challenges in its pursuit to build a sound business profile. These challenges mainly emanated from few projects involving cost overruns and legal/contractual disputes, leaving drag on overall equity base. Debt service coverages remained stressed given weak cash flows from operations. Nevertheless, 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 disputes and recover receivables to minimize deficit in projects where the company had incurred losses. 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.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com