Press Release
VIS Reaffirms Entity Ratings of Izhar Construction (Pvt) Limited
Karachi, June 29, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Izhar Construction (Pvt.) Limited (ICPL) at ‘A-/A-1’ (Single A Minus/A-One. The medium to long-term rating of ‘A-’ signifies good credit quality with strong protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payments, excellent liquidity and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 31, 2019.
The ratings assigned to ICPL take into account the company’s sound business risk profile emanating from its association with Izhar Group of Companies having an established footprint and strong brand equity in the construction business developed over the years. The ratings also incorporate inherent synergies and diversification in the group structure providing implicit strength to the business model. Given depressed economic indicators and muted growth in construction sector in line with emergence of pandemic, the profitability and liquidity indicators took a sizable hit as the coverages were recorded in negative. However, the impact of heightened credit and liquidity risk in line with meager cash flow generation is largely mitigated by company’s conservative capital structure with virtually debt free balance sheet and no contractual repayments due. On the other hand, non-funded obligations are integral part of the business model.
The company maintains one of the highest equity base amongst peers indicating sound loss absorption capacity; the same along with sizable cash balances and mega ongoing projects ensuring revenue generation in the coming years subside the elevated financial risk profile of the company. However, the ratings remain sensitive to ICL’s presence in high business risk sector involving capsizing of revenues owing to political unrest & instability, regulatory changes and missed completion deadlines. The ratings will remain dependent on upholding financial metrics involving timely completion of key commercial projects without any significant cost and time overruns. In addition, maintenance of healthy sales velocity and collection efficiency, as projected, will remain crucial to ratings to avoid cash flow mismatches. Any adverse movement in sensitivity indicators may result in revision of ratings.
For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 or email at info@vis.com.pk
Faryal Ahmed Faheem
Deputy CEO
Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx