Press Release

VIS Reaffirms Entity Ratings to Engro Enfrashare (Private) Limited

Karachi, May 06, 2022: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Engro Enfrashare (Private) Limited at ‘A-/A-2’ (Single A Minus/Single A Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors.Outlook on the assigned ratings is ‘Stable’.

Established in November 2018, Engro Enfrashare (Private) (‘Enfrashare’ or ‘the Company’) Limited has gradually emerged as industry leader in the Tower Company (TowerCo) industry in Pakistan. The Company is principally involved in providing telecommunication infrastructure and related services to telecommunication providers (telcos) - mainly Mobile Network Operators (MNOs) and Internet Service Providers - in exchange for rental fee.

The assigned ratings incorporates TowerCo industry’s low business risk and Enfrashare’s dominant market positioning. The overall business risk profile of the industry is considered low given extensive lock-in periods, limited scope for termination, and an escalation clause which is part of the Service Agreement. Furthermore, the industry’s demand outlook is positive, given rising demand of towers being driven by growing mobile data usage and sizeable potential for coverage and capacity expansion. Tenancy ratio is a key growth driver in TowerCo business, which remains on the lower side in Pakistan, indicative of room for growth.

Ratings takes into account strong sponsor profile of Enfrashare, which is a wholly owned subsidiary of Engro Connect (Private) Limited. The ultimate parent company is Engro Corporation Limited (Engro), which is one of the largest domestic conglomerates engaged in diverse businesses including fertilizers, LNG, energy, food and chemical sectors. Given high capital expenditure requirements of TowerCo business model, Engro has invested Rs. 11b in Enfrashare, and committed to invest another Rs. 10b over the next 4-year period.

Ratings is constrained by elevated financial risk profile of Enfrashare. Even though, Enfrashare’s financial risk profile has improved in the outgoing year, given sizable equity injection, gearing and leverage remain on the higher side. Given sizeable capital expenditure - which is higher going forward than previously envisaged - gearing is forecasted to remain elevated over the rating horizon. Cash flows coverages are expected to improve from historical level, albeit will remain stressed.

For further information on this rating announcement, please contact the undersigned (Ext. 201) at 021-35311861-70 or fax to 021-35311873.

Sara Ahmed

VIS Entity Rating Criteria: Corporates -August 2021

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .