Press Release

VIS Reaffirms Entity Ratings of Lahore Sialkot Motorway Infrastructure Management (Pvt.) Limited

Lahore, December 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Lahore Sialkot Motorway Infrastructure Management (Pvt.) Limited (LSMIML) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on November 14, 2022.

LSMIML is a Special Purpose Company (SPC), jointly owned entity of Frontier Works Organization (FWO) and National Highway Authority (NHA), both having extensive experience in infrastructure development projects, including public-private partnership and Build Operate and Transfer (BOT) mandates. The company has entered into a concession agreement for a period of 25 years with NHA for construction, management and maintenance of Lahore-Sialkot Motorway (LSM). Under the agreement, LSMIML as concessionaire is responsible for construction as well as operations and maintenance. During the outgoing year, O&M responsibility has been transferred from FWO to the project management team of the company.

The majority of the company's revenue emanates from toll collection, which has been primarily impacted by a decline in the volume of heavy vehicles amid economic slowdown and inflationary higher toll charges. Overall financial risk profile is weak as the project is passing through a phase where its cash flows are falling behind its annual revenue build up given the long gestation period of infrastructure projects. The management expects this be normalized in the next few years as envisaged in planning. Moreover, massive hike in markup rates has further dragged the bottomline. Hence, liquidity profile has remained stressed due to net losses, impacting debt servicing ability of the company. During FY23, the company reprofiled its debt due to cash flow challenges and consequently, the debt repayment timeline was extended by six months period while each installment has been capped at Rs. 1.1b. Any markup amount exceeding the capped installment amount shall be deferred by the banks and will be pooled together to be cumulatively paid on the last installment date. Nonetheless, the ratings derive comfort from an irrevocable and unconditional commitment of FWO to fund the capped installment amount, in case any shortfall occurs. The ratings remain underpinned by maintenance of sponsor support agreement for debt service support and strategic importance of the project.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-12 (Ext. 8005) and/or the undersigned at 042-35723411-12 (8008) or email at

Maimoon Rasheed

Applicable Rating Criteria: Industrial Corporates

VIS Issue/Issuer Rating Scale

VIS Rating Criteria: Toll Roads

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