Press Release

VIS Reaffirms Entity Ratings of Ghotki Kandhkot Road & Bridge Company (Pvt.) Limited

Karachi, July 31, 2024: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Ghotki Kandhkot Road & Bridge Company (Pvt.) Limited (‘’GRBC’’ or ‘’the Company’’) at 'A/A-2' (Single A/A-Two). The long-term rating of ‘A’ signifies Good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy.The short-term rating of ‘A-2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. VIS has also assign preliminary bank loan rating (blr) of ‘AA (blr)’ (Double A (blr)) to GKRBC’s secured bank loan facility planned to be drawn for the construction of a bank to bank bridge and approach roads over river Indus “Project”. Outlook on the assigned ratings remains ‘’Stable’’. Previous Rating action was announced on March 15, 2023.

Ghotki Kandhot Road & Bridge Company (Private) Limited ('GRBC' or 'the Company') was incorporated on May 21, 2018 under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). It is a subsidiary of Sachal Engineering Works (Private) Limited ('SEWL' or 'the Holding Company'), which currently owns 53.33% of the Company. Government of Sindh (GoS) holds the remaining 46.67% shares without any voting rights. GRBC operates as a special purpose vehicle (SPV) for undertaking the design, finance, building, operation, and transfer (DFBOT) of the project. Originally the project envisage construction of a 30.2 kilometers (kms) highway and a 2 km bridge over the River Indus on DFBOT basis. . In November 2022, the project scope was expanded to include building a bridge across the entire span of River Indus, totaling 12.20 km .Additionally, approach roads of 10.40 km from the Ghotki side and 8.341 km from the Kandhkot side were incorporated, resulting in a combined length of 30.941 km. Furthermore, a 4.58 km Thul Link Road was also added to the project.

The assigned ratings reflect GRBC's low business risk profile, underpinned by minimal demand risk and established construction milestones between GoS and GRBC. Full financial backing from the GoS and SEWL reinforces the assigned ratings. However, potential liquidated damages and implementation risk due to project delays pose a significant constraint on the ratings.

The ratings incorporate a strengthened security structure comprising a continuous, unconditional, and irrevocable debit authority on the GoS Non-Food Account No. 1, supported by the Provincial Guarantee covering 50% of the debt to be obtained. Advance quarterly annuity payments by GoS to GRBC, covering O&M costs, taxes, debt obligations, a fixed ROE, and equity redemption, provide adequate support to the Company’s coverage profile. The ratings also acknowledge the Company’s immunity from financial repercussions in case of project termination. Additionally, the implementation of the Environment Management Plan (EMP) as part of an Environment, Sustainability Governance (ESG) framework contributes positively to the assigned ratings.

Moving forward, the ratings will continue to be sensitive to achieving financial close, ensuring timely completion of key milestones, and execution of the project without experiencing significant cost or time overruns.

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
VIS Rating Criteria: Toll Roads Rating
https://docs.vis.com.pk/docs/TollRoads_2023.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 .