PACRA Maintains Entity Ratings of Zahir Khan & Brothers

The ratings reflect Zahir Khan & Brothers' (ZKB) financial & business strength. ZKB, one of the leading contractors of Pakistan, is known for undertaking large infrastructure projects on standalone basis as well as in collaboration with different JV partners. ZKB is led by Zahir Khan and family - a name well known in the construction industry. The firm possesses a robust portfolio of both ongoing and upcoming projects. However, the same has not translated into impressive numbers due to the overall economic downturn and challenges related to site accessibility. A majority of the projects have secured funding from international donor agencies, providing a safeguard against issues related to timely funds disbursement and changes in the political environment. Anticipated financial growth hinges on the alleviation of overall economic stress and commencement of work on the projects that have been successfully awarded, including few substantial Public-Private Partnership (PPP) endeavours. Once these projects reach financial closure and commence, it is expected to result in robust and sustainable financial performance in the future. ZKB has booked net profit of PKR 10,360 mln in FY23 (FY22: PKR 1,334 mln; FY21: PKR 902 mln; FY20: PKR 3,996 mln). This notable surge in profits is attributed to substantial gains from the revaluation of its investment properties. Being an integral part of business model, the firm meets its business funding needs by non-funded lines of banks and suppliers’ credit mostly, however, it has also started procuring short-term borrowings recently to support its working capital requirements. The non-funded exposure is expected to increase with increasing project base; however, comfort can be drawn from rich equity base and investment property bank of the firm.
The ratings are dependent on the upcoming big projects undertaken by management for sustainability of the business and financial structure of ZKB. Governance and corporate structure must evolve to comply with best practices and improved financial transparency as management has expressed its mandate to corporatize the firm’s legal structure. Financial metrics need to be upheld as well.

About the Entity
Zahir Khan & Brothers is established in 1970. ZKB, as among the large players in construction sector, currently nurtures projects that span across such diverse segments of the construction industry, all of which impact the nation of Pakistan, and the progress of its people. M/s. RSM Avais Hyder Liaquat Nauman Chartered Accountants, is the external auditor of the firm. The auditors have expressed an unqualified audit opinion on the financial statements of Zahir Khan & Brothers for the year ended June 30, 2023. With over hundreds of projects, ZKB’s portfolio has covered the entire spectrum of construction work in every corner of Pakistan. ZKB is registered as a Partnership firm and owned by 4 Partners. Mr. Zahir Khan, the key founder and CEO of ZKB, with deep hands-on knowledge, and extensive construction industry experience of nearly 4 decades owns 51%, Mr. Mohabbat Khan owns 41%, Mr. Suleman and Mr. Samiullah hold 4%each respectively