Press Release

VIS Reaffirms Entity Ratings of Sachal Engineering Works (Pvt.) Limited.

Karachi, November 18, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Sachal Engineering Works (Pvt.) Limited (‘SEWL’ or the ‘Company’) at ‘A-/A2’ (Single A Minus/A Two). The medium to long-term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in economy. Short term rating of ‘A2’ indicates good likelihood of timely repayment of short-term obligation with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on August 23, 2023.

SEWL operates in infrastructure development sector, primarily involving Engineering, Procurement and Construction (EPC) contracts for construction of roads, bridges and related projects. In an infrastructure-starved country, the Company’s business risk profile is considered low due to the significant investment expected in both China-Pakistan Economic Corridor (CPEC) and non-CPEC projects. These projects, funded largely by internal sources, such as government and public-private partnerships (PPP), as well as external multilateral and bilateral sources, are anticipated to involve substantial capital over a prolonged period. The diversification of the Company by way of investments in Toll Roads and Hydro Power projects while mitigating the business risk, also provides financial strength to the Company.

During FY24, more than two-thirds of the revenues emanated from Ghotki Kandhkot Road and Bridge project over the Indus River, which is expected to be completed in Jan’28. As major cost components are indexed to inflationary adjustments in such projects, gross margins have remained healthy and depicted a range-bound variation over the years. The liquidity position of the Company is underpinned by adequate cash flows against outstanding financial obligations. In addition, the responsibility of financing arrangements in PPP projects lies with the respective Government entities, ensuring adequate and timely availability of funds, including coverage for cost overruns as well. The leverage indicators have remained at comfortable level on a timeline basis, reflecting Company’s cautious approach towards borrowing. The assigned ratings however will remain dependent on upholding financial metrics involving the timely completion of key projects. Moreover, effective management of business risks related to inherent uncertainty in the bidding process and timely receivables collection to avoid cash flow mismatch are considered critical from a rating perspective.

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




Applicable Rating Criteria:
Industrial 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 .