The Pakistan Credit Rating Agency Limited
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Ayesha Malik

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PACRA Maintains Entity Ratings of Mega Conglomerate (Pvt.) Limited

Rating Type Entity
(14-Dec-19 )
(14-Jun-19 )
Action Maintain Initial
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflects the Company's association with Mega & Forbes Group of Companies, an established group with presence in shipping, logistics, real estate development, cement, energy and food sectors. Mega Conglomerate (Mega) operates under a holding company structure with an aim to acquire and consolidate some of the group's investments in energy, real estate and food sectors. The rating incorporates the Company's sizeable holding in The Hub Power Company and stake in Haleeb Foods (through Mega Foods (Pvt.) Limited formerly called VMFG (Pvt.) Ltd.) and investment property (through Imperial Developers and Builders (Pvt.) Ltd.). The Company primarily drives its income from dividend stream of underlying investments. The profitability remains under pressure due to high interest expense emanating from debt acquired for financing the investment portfolio. However, the debt is fully backed by liquid investments and securities including HUBCO shares. The Company has redesigned its debt structure to improve liquidity and release certain underlying securities. The equity base strengthened on the back of equity injection and sub-ordinate loan from sponsors/group companies. Ratings draw comfort from presence of sufficient liquid investment, in form of TDR's and TFC's, on the the Company's balance sheet and expected support from sponsors, if needed.
The ratings are dependent on the performance of existing strategic investments and execution of their envisaged business strategies resulting in sustainable revenue stream. Strengthening the governance framework would be important for the ratings.

About the Entity
Mega Conglomerate (Pvt.) Limited (Mega) was incorporated as a private limited company in 2010 in Pakistan under the repealed Companies Ordinance, 1984. The registered office of the Company is situated in Karachi, Pakistan. The Company is owned by Mr. Habibullah Khan (56%) and Mrs. Nusrat Khan (44%). Mr. Habibullah Khan is the founder and Chairman of Mega & Forbes Group. Mega has strategic investments of PKR 24.9bln (as at Sept-19) in an associated company - Hub Power Company Limited (HUBCO) and wholly owned subsidiaries – Mega Foods (Pvt.) Limited, formerly called VMFG (Pvt.) Limited, and G4 Mega Pakistan (Pvt.) Limited (G4). Mega Foods has 56% stake in Haleeb Foods, whereas, G4 owns 100% stake in Imperial Developers and Builders (Pvt.) Limited (IDBL). Moreover, IDBL owns 100% stake of Karachi Properties Investment (Private) Limited (Hotel Metropole). IDBL is engaged in real estate development and has sizeable investment property in Karachi.

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.