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The Pakistan Credit Rating Agency Limited
Press Release

Date
14-Apr-23

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA maintains entity ratings of Matracon Pakistan (Pvt) Limited

Rating Type Entity
Current
(14-Apr-23 )
Previous
(20-Apr-22 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Matracon Pakistan is in business since 1996 and is a big name in the construction industry. It has delivered many public and private projects since its inception. Matracon embarks upon large infrastructure projects in collaboration with different international JV partners including Chinese, which in their own right are established institutions. Matracon was originally focused on roads construction and drainage systems, but recently the Company is focusing on designing buildings. During FY22 the Company posted a topline of PKR 14.3bln as against PKR 9.9bln in FY21 owing to numbers of projects completed in FY22 resulting in the better topline. However, the improved revenues do not translate the same in margins, reported to be 12% as against 21% in SPLY. The shrinkage in margins along with a slowdown in the progress of the projects and recoveries were witnessed due to the upsurge in basic raw material prices and increased policy rates. The Company has requested the cost escalation against the already-in-hand projects, the negotiations of which are under way. However, adding new projects in current project bank remains imperative for the ratings. The business funding needs are met by non-funded lines of banks. Equity base of Matracon is adequate especially when compared with the non-funded obligations assumed by the Company.
The ratings are dependent on the sustainability of the business and its financial structure; sustaining a steady revenue stream and timely completion of projects without any significant cost and time overruns. In addition strengthening of projects pipeline and collection efficiency, as projected, will remain crucial to ratings. Any prolonged downturn in subdued business volume can have a detrimental effect on the rating. Improvement in governance and control environment is also important and needs to be strengthened.

About the Entity
Matracon Pakistan (Pvt) Ltd. was established by Mr. Abdul Qadir in 1996 and later on converted into private limited company in 2006. The executive roles are held by Mr. Abdul Qadir and Mr. M. Ayub who are the only board members and 'Active' shareholders. Mr. Jehanzaib Saulat has joined the Company as a CEO recently. Clarkson Hyde Pakistan is the external auditor of the Company. The auditors have expressed an unqualified audit opinion on the financial statements of Matracon Pak for the year ended June 30, 2022.The main expertise of Matracon Pak historically has been relevant to NHA related projects, however the focus is now being shifted towards construction of buildings and commercial towers as well. Scope of work comprises construction of roads, bridges, tunnels, canals and drainage systems. Significant projects to its credit including the mega construction projects of almost (PKR ~49bln) out of which projects worth of PKR ~30bln has been completed whereas remaining projects worth of PKR ~10.26bln is in progress with other Government and semi-Government Departments.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.