Press Release

VIS Reaffirms Entity Ratings of Tower Power (Pvt.) Limited

Lahore, February 21, 2024: VIS Credit Rating Company reaffirms entity ratings of Tower Power (Pvt.) Ltd. (TPL) at 'A-/A-2'. Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains ‘Stable’. Previous Rating action was announced on October 05, 2022.

The ratings assigned to TPL incorporate the TowerCo industry’s medium-low business risk involving extensive lock-in periods, limited scope for termination and an escalation clause built in the Service Agreement. Tenancy ratio is a key growth driver in TowerCo business, which remains on the lower side in Pakistan and is indicative of room for growth. Moreover, the industry’s long-term demand outlook is positive stemming from rising demand of towers in turn being driven by growing mobile data usage, higher population density and increased technology dependence; the same paves way for improved coverage and capacity expansion. However, business growth is expected to remain limited in the medium-term on account of macroeconomic weakening. In addition, the ratings factor in synergies available to TPL on the technical front as the parent organization serves as an EPC contractor.

The financial risk assessment takes note of high gross margins that are characteristic of TowerCo industry. However, the same does not translate into bottom line owing to sizable financial expense borne in line with reliance on long-term funding to meet capacity expansion targets. The ratings incorporate overall fair liquidity profile and efficient working capital management. Despite procurement of incremental long-term debt to fund capex, gearing and leverage indicators remained on a lower side and well aligned with the assigned ratings. The conservative capital structure is also underpinned by short-term debt free balance sheet as the Company enjoys negative cash conversion cycle; the same is an outcome of the absence of inventory turnover as tower construction is outsourced to ATL. Given, there are plans to mobilize borrowings in the near future to fund expansion of tower portfolio, gearing and leverage indicators are projected to increase slightly on a timeline by end-FY25. Subsequently, the ratings remain contingent upon uptick in net margins and maintenance of liquidity and rangebound capitalization indicators along with materialization of growth targets.

For further information on this ratings announcement, please contact the undersigned at 042-35723411-13 (Ext: 8008) or email at info@vis.com.pk.



Maimoon Rasheed
Director

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

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