The Pakistan Credit Rating Agency Limited
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Silwat Malik

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PACRA Maintains Entity Ratings of Engro Corporation Limited

Rating Type Entity
Action Upgrade Maintain
Long Term AA+ AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Engro Corporation's ('Engro Corp') very strong risk profile. The HoldCo's diverse pool of investments previously under its three strategic pillars i.e. fertilizer, consumer goods and energy have been re-aligned to four strategic pillars i.e agri-solutions, consumer, energy infrastructure and petrochemicals. Significant liquid resources post divestment of sizable stake in EFoods and EFert allow Engro Corp to explore various investment avenues.
Engro Corp’s existing portfolio has shown significant growth. While, EFert and EVopak continue as stable cash producers, EPolymer and Elengy have also joined the ranks. This has added the much needed diversity to the HoldCo's revenue streams which would further strengthen with increase in dividends.
Of late EPolymer has made a major turnaround owing to fundamental changes in the international industry dynamics compounded by operational efficiencies. Given the strong demand in the local markets and the company’s fortified position in the PVC industry, EPolymer is past it’s difficult times and is expected to reap full benefits of it’s planned expansion. Engro Corp has sizeable investment in energy chain through Engro Energy. Here coal mining along with coal based power plant are the key projects. These are nearing harvest and should add to dividend flow in the medium-term.
At a financial risk level, Engro Corp is operating at a modest leverage. It's strategy to limit debt levels to fifty percent of its equity(excluding sovereign linked debt) at group level give comfort to its current ratings.
Ratings recognize the HoldCo's re-alignment of its organizational structure which allows greater control over the strategic direction of its subsidiaries. Positive structural adjustments have been made to improve performance monitoring, HR deployment, strategy setting, and capital allocation.
The ratings reflect the company's ability to execute its envisaged strategy of growth and expansion. Sustainability in the performance of subsidiaries as envisaged along with effective management of financial profile on a group-wide basis remains important.

About the Entity
Engro Corporation Limited is a listed Holding company. Engro Corporation Limited has expanded its footings in diversified business avenues with sizable portfolio of strategic investments. The group’s business portfolio spans across various sectors including fertilizers, PVC, food, power generation, coal mining, LNG storage. Dawood family holds 45% stake in Engro Corp majority of which is through its corporates, whereas less than 1% is owned through individuals of Dawood family. The group has a strong presence on the board as well. Mr Hussain Dawood chairs the Board of Directors whereas Mr Ghias Khan is President and CEO of Engro Corp.

About the Instrument
Engro Islamic Rupiya Certificates-II are listed and secured Ijarattul Musha and Murahaba Sukuk certificates of PKR 1,000 mln issued during ‘Jul-14. These are secured against first ranking parri passu floating charge with mark-up of 13.5% p.a paid semi-annually. Principal repayment will be at the end of the tenor of 5 years in Jul ‘19 or early through put option available to Sukuk holders.

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.