Press Release

VIS Reaffirms Sukuk Rating of Javedan Corporation Limited

Karachi, October 09, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the instrument rating of the Sukuk issued by Javedan Corporation Limited (‘JCL’ or the ‘Company’) at ‘AA-’ (Double A Minus). The medium to long-term rating of ‘AA-’ denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned rating remains ‘Stable’. Previous rating action was announced on July 27, 2023. Entity ratings of JCL have also been reaffirmed at ‘A+/A-1’ with ‘Stable’ outlook

Javedan Corporation Limited was incorporated in Pakistan on June 08, 1961, as a public limited company under the repealed Companies Act, 1913 (now Companies Act, 2017) and is listed on Pakistan Stock Exchange Limited. The registered office of the Company is located at Arif Habib Centre, 23, M.T Khan Road, Karachi. The Company has ceased its cement business since July 01, 2010 and the management has developed business diversification strategy for utilizing the Company’s land having area of 1,367 acres for developing a housing scheme, “Naya Nazimabad”, that includes bungalows, open plots, flat sites and commercial sites.

The Company had issued privately placed sukuk certificates aggregating to Rs. 2,993 mn for a period of 8 years (inclusive of 2 years grace period) to make payment of commercial land purchased in the year 2018. These carry markup at the rate of 6 months KIBOR plus 1.75 percent per annum and are redeemable in 12 equal installments starting from April 04, 2021 till October 04, 2026.The facility is secured by equitable mortgage charge over land of Rs. 4,285.714 million against 49 plots and other assets (i.e. stand-by letter of credits, collection account and sponsors support agreements).

The assigned rating incorporates support from JCL’s sponsor, the Arif Habib Group. JCL’s business risk profile reflects its exposure to the cyclical nature of the real estate and construction industries, which are influenced by economic and political factors, fluctuations in purchasing power, volatility in raw material prices, and competitive pressures. The assessment also considers the Company’s well-established brand and its sizeable land holdings.

The Company’s financial risk profile is dependent upon revenues which are primarily driven by land sales. Revenue growth was notable in FY23, particularly through Real Estate Investment Trust (REIT) structures, but has normalized in FY24. Margins have improved due to rising property values. However, moving forward, sustaining revenue and margins amidst evolving market conditions will be key rating drivers.

Capitalization levels remain manageable, depicting equity growth and a reduction in leverage, on account of internal profit generation. Liquidity management remains important due to inherent volatility in real estate cash flows. Thus, maintaining adequate debt servicing coverage will be important going forward. Ratings remain underpinned on achievement of management outlook regarding growth, continued support of sponsors for debt service coverage, if needed, retention of profitability and availability of working capital lines as planned.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Applicable Rating Criteria: Construction Industry
https://docs.vis.com.pk/Methodologies%202024/CONSTRUCTION-INDUSTRY-RATING-CRITERIA.pdf
Applicable rating criterion: Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .