PACRA Maintains Entity Ratings of 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 (Pvt.) Ltd. (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 sizable holding in The Hub Power Company Limited 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 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 subordinate loan from sponsors/group companies. Going forward, expected dividend stream, which has been lately augmented from the commercial operations of China Power Hub Generation Company, will support the financial profile. Moreover, 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.
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 Limited (Mega) was incorporated as a private limited company in 2010 in Pakistan under the repealed Companies Ordinance, 1984.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 Sep-20) in an associated company - The Hub Power Company Limited (HUBCO) and PKR 1.3bln in two 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. During FY20, Mega has entered into a joint venture with THK to hold 50% stake in PayPro (Pvt.) Ltd - a fintech startup.