Press Release

VIS Reaffirms Entity Rating of Engro Enfrashare (Private) Limited

Karachi, October 21, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity rating of Engro Enfrashare (Private) Limited (‘Enfrashare’ or ‘the Company’) of A-/A-2 (Single A minus/A-two). Long-term entity rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk may vary with possible changes in the economy. Short-term rating of “A-2” indicates good likelihood of timely repayment of short-term obligations with satisfactory liquidity factors. Outlook on the assigned rating is Stable. Previous rating action was announced on September 08, 2023.

Enfrashare began its operations in November of 2018 and it is one of the leading Tower Companies (“TowerCo”) in Pakistan. The core activities involve designing, constructing, and managing telecom infrastructure networks that enable connectivity throughout the country. The tower count as at end Jun’24 stood at 4,063.

Assigned ratings account for the low business risk profile of the TowerCo industry characterized by long-term lock-in periods, limited termination scope, and service agreements with escalation clauses. In addition, ratings reflect Enfrashare’s dominant market position with a ~53% market share. Demand outlook for the sector remains positive driven by increasing mobile data usage and significant opportunity for coverage and capacity expansion. Moreover, the tenancy ratio, a critical growth driver for the TowerCo business model also remains low at 1.2x in Pakistan compared to international market indicating further growth potential.

The ratings also incorporate the Company’s recent business developments. In CY23, Enfrashare's revenue increased by 45% year-over-year, driven by a rise in the number of towers installed and an improved tenancy ratio. The Company also maintained a healthy gross profit margin during this period. However, despite strong gross margin, profitability remained constrained due to high finance costs.

Assessment of financial risk profile reflects elevated gearing and leverage levels. Consequently, debt servicing and liquidity metrics remain under pressure. The sponsors have injected equity of Rs. 5.7 billion during CY23 and Rs. 3.0 billion during HY’CY24 to support the operations. Going forward, continued sponsor support will remain critical to sustain the assigned ratings.

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

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 .