PACRA Maintains Entity Ratings of New Horizon Computer

Pakistan’s tech industry contributes ~1% to national GDP through local and export sales. Export of IT services is estimated to generate a revenue of ~$2.6bln. The sectors are expected to continue growing at an CAGR of ~20-25%. Pakistan’s IT exports have grown exponentially over the last 5 years with a growth of 137percent. The largest contributor remains IT consultancy (~33%), followed by software exports (~25%). The industry comprises ~ 7000 companies providing customized software development services and Business Process Outsourcing (BPO) services. In recent past, the Government and regulatory bodies have started to take initiatives such as the establishment of IT Parks and incubators to promote the industry and provide an enabling ecosystem for businesses and start-ups.
The ratings reflect New Horizon Computer's ('the Business') developing business profile as an information technology (IT) services and solutions provider. The product slate of the business comprises IT based solutions, including cloud computing, data protection, backup & recovery, networking hardware & software, and ERP systems management. The Business also provides Service Legal Agreements (SLAs) for repair, maintenance, and refurbishment services. With a small market share, revenue is generated from the local market only and posts considerable growth. This led to sanguine margins, and in turn profitability of the Business. The financial risk profile is characterized by strong coverages, however, holds an elongated working capital cycle. Moreover, capital structure is moderately leveraged. This, if supplemented by borrowings from the Sponsors, would be provide support. However, sound business acumen of the Sponsors bode well for the ratings.
The ratings are dependent on the management's ability to diversify the revenue stream by global outreach along with stabilizing margins and profitability. However, improving financial profile of the Business remains crucial. Meanwhile, strengthening governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will have a negative impact on ratings.

About the Entity
New Horizon Computer ('the Business') is an association of person (AoP). The Business was registered in 2003, and is owned by Mr. Hanif Akbar Ali (~51%) and Mr. Rahim Iqbal (~49% , CEO). The primary business activity involves the provision of IT based solutions. Management team comprises qualified professionals having significant experience in respective fields.