Press Release

VIS Assigns Initial Entity Ratings to Lahore Grammar School (Private) Limited

Karachi, November 29, 2023: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Lahore Grammar School (Private) Limited (“LGS” or “the Company”). Medium to long-term rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ indicates good certainty of timely payment; liquidity and fundamental factors are sound. Access to capital market is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

LGS was established in 1979 in Lahore, by a group of eight educationists with an aim to encourage quality education following the rapid decline in educational standards after nationalization. LGS, as of today, has over 90 campuses in 15 cities, however, presence has largely been Lahore-based. The School offers internationally recognized education system with target market of middle to high income groups. Student strength is about 55,000 students, administered under a cluster arrangement by five executive sponsor directors.

Assigned ratings factor in low business risk profile of the school segment characterized by low cyclicality and medium to low competition. Growing population continues to foster demand. Ratings also take comfort from LGS’s prominent position in the industry with an operating history of over 3 decades, and established reputation for hiring well-qualified staff and delivering successful results.

Ratings incorporate the steady topline growth, which is expected to continue to grow, on the back of fee increase as well as periodic expansion. Ratings draw comfort from the ability to pass on costs, albeit with a lag, given relatively inelastic demand. As such gross margins have remained strong over the years, however, depict volatility on the operating and net level because of inflationary pressures and interest rate hike. Rising costs are progressively incorporated in fee structure, affecting margins in the interim. Ratings also reflect adequate liquidity and capitalization profile of LGS. Capital expenditure funding over the last 4 years from internal cash flows and higher payouts has impacted liquidity and constrained equity growth. In addition, business peculiarity of recording advance fee and salaries payable results in low current ratio and high leverage at the end of reporting period. However, healthy FFO generation and FFO/LTD coverage provides comfort. Going forward, profit retention will remain important for improving capitalization profile.

For further information on this ratings announcement, please contact Ms. Gul Aina Sohail and/or the undersigned at 021-35311861-66 (Ext: 207) or email at info@vis.com.pk.


Sara Ahmed
Director

Applicable Rating Criteria: Educational Institutions (September 2023)
https://docs.vis.com.pk/docs/EducationalInstitution-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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .