VIS Reaffirms Ratings for Sachal Engineering Works

Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sachal Engineering Works (Pvt.) Limited (SEWL) at ‘A-/A2’. The medium to long-term rating of ‘A-‘ reflects good credit quality with adequate protection factors, while the short-term rating of ‘A2’ indicates a good likelihood of timely repayment of obligations and sound liquidity. The outlook on these ratings is stable, with the previous rating action having been announced in August 2023.

According to VIS Credit Rating Company Limited, SEWL operates in the infrastructure development sector, focusing on Engineering, Procurement, and Construction (EPC) contracts for roads, bridges, and related projects. The company’s business risk is considered low due to anticipated significant investment in projects related to the China-Pakistan Economic Corridor (CPEC) and non-CPEC initiatives. These projects are expected to attract substantial capital investment from both internal sources, such as government funding and public-private partnerships, as well as external multilateral and bilateral sources.

For the fiscal year 2024, SEWL’s revenues were primarily driven by the Ghotki Kandhkot Road and Bridge project over the Indus River, scheduled for completion in January 2028. The projects’ cost components are indexed to inflationary adjustments, keeping gross margins stable. The company’s liquidity position is supported by adequate cash flows, and government entities are responsible for financing arrangements in public-private partnership projects, ensuring timely fund availability and coverage for potential cost overruns. SEWL maintains comfortable leverage indicators due to its cautious borrowing approach. The ratings remain contingent on the company’s ability to uphold financial metrics, timely project completion, and effective management of business risks, including bidding process uncertainties and receivables collection to prevent cash flow mismatches.

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