PACRA Assigns Initial Entity Ratings to Mega Conglomerate (Pvt.) Limited
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. Mega has substantial debt on its balance sheet. However, this debt is fully backed by liquid investments and securities including HUBCO shares, TDRs, and TFCs. Mega is in the process of issuing a short term Sukuk to alleviate liquidity pressure and subsequently substitute the same through a long term Sukuk. The ratings draws comfort from built in covenants for timely Sukuk payment including commitment from the Company to have sufficient liquid investment on the balance sheet at the time of repayment.
The ratings are dependent on timely and successful re-profiling of debt resulting in improved liquidity position of the Company. Adherence to agreed covenants and maintenance of adequate resources for repayment of short term Sukuk remains critical. Strengthening the governance framework would be beneficial for the ratings.
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 Limited (Mega) was incorporated as a private limited company in 2010 in Pakistan under the repealed Companies Ordinance, 1984.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 24.6bln (as at Dec-18) 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.