Press Release

VIS Reaffirms Ratings of Lahore Sialkot Motorway Infrastructure Management (Private) Limited

Karachi, Oct 07, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sialkot Motorway Infrastructure Management (Private) Limited (LSMIM) at ‘A-/A-2’ (Single A minus/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’. The previous rating action was announced on August 19, 2020.

The ratings assigned to LSMIM take into account the sound financial profile of its two sponsors; the shareholding is vested with Frontier Works Organization (FWO) (Class A shares) and National Highway Authority (NHA) (Class B shares) with both having sizable experience in infrastructure projects. FWO has undertaken major projects under public private partnership (PPP) and Build-Operate-Transfer (BOT) mandates. The ratings derive strength from financial planning and execution resulting in avoidance of cost overruns, so far. The assigned ratings take comfort from presence of Debt Service Reserve Account (DSRA) with an amount equal to next debt repayment installment to be maintained at all times after termination of grace period. Although, the account was not funded during the rating review period owing to one-year deferment allowed by the central bank, the risk of unavailability of adequate funds is mitigated as the responsibility of DSRA funding rests with the sponsor, FWO. In addition, implicit support from the sponsor was witnessed as the company procured subordinated loan from FWO during the outgoing year to meet liquidity constraints. As per agreement, any other shortfall in project financing going forward will also be provided by FWO in form of equity or subordinated loan.

Ratings incorporate the project’s low leveraged financial plan, its completion status of 95% and it being operational since March 2020. However, shortfall in actual revenues from projected stemming from restricted travelling amid Covid and non-availability from NHA, the owner, of concession area, and consequential incomplete construction works at Sambrial Interchange continue to impact the ratings. Ratings take note of the increase in traffic volumes and revenue in the past year though behind targets. Further, in case of unprecedented scenarios involving downward revision of toll rates, the revenue risk is accounted for as LSMIM is guaranteed to receive compensation from NHA for the loss in revenues. The indigenous liquidity profile of the company remains weak in line with negative coverages; however, the same is mitigated at varying levels in line with support extended by sponsors. Going forward, ratings, besides the above commitments of FWO, also remain dependent on successful achievement of COD in stipulated time, with no further delays. Further, traffic volumes following COD and the maintenance of DSCR at certain level as specified in concession agreement, are imperative to the assigned ratings.

For further information on this rating announcement, please contact Ms. Maham Qasim 042-35723411-13 (Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Corporates (August 2021)

VIS Rating Criteria: Toll Roads (August 2020)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited