The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Assigns Initial Entity Ratings to Matracon Pakistan (Pvt.) Ltd

Rating Type Entity
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

Matracon Pakistan holds experience in construction industry of Pakistan for over two decades. Matracon has delivered multiple, public and government projects of which the completion spanned a number of years. Matracon embarks upon large infrastructure projects in collaboration with different international JV partners including Chinese and Japanese, which in their own right are established institutions. Matracon was originally focused on roads construction and drainage systems, but recently the Company is focusing on designing buildings. Construction industry’s prospects seems to be promising in terms of increasing PSDP funding and civil works related to CPEC and otherwise all around the country. Matracon reported adequate profit margins in FY20, though in 1HFY21, the management has reported higher net profits. The trends towards the full year is yet to be seen. The business pipeline reflects fewer projects, though the management is hopeful of gaining new projects based upon current picked up pace in construction sector however the tussle in margins still remain critical. This is owing to the number of construction players and tougher competition. The business funding needs has been met by non-funded lines of banks and JV partner’s guarantees. Equity base of the Company is adequate especially when compared with the non-funded obligations assumed by the Company.
The ratings are dependent on the sustainability of the business and its financial structure; sustaining a steady revenue stream and financial risk profile. Financial metrics need to be upheld as well. Strengthening of projects pipeline is also essential for the ratings. Any prolonged downturn in subdued business volume can have a detrimental effect on the rating. Improvement in governance and control environment is also important and needs to be strengthened.

About the Entity
Matracon Pakistan (Pvt) Ltd. was established by Mr. Abdul Qadir in 1996 and later on converted into private limited company in 2006. The executive and operational roles are held by Mr. Abdul Qadir and Mr. M Ayub who are the only board members and 'Active' shareholders. M/s. Zahid Jamil & Co. Chartered Accountants, is the external auditor of the Company. The auditors have expressed an unqualified audit opinion on the financial statements of Matracon Pak for the year ended June 30, 2020.The main expertise of Matracon Pak historically has been in projects relevant to NHA related projects, however the focus is now being shifted towards construction of buildings and commercial towers as well. Scope of work comprises construction of roads, bridges, tunnels, canals and drainage systems. Significant projects to its credit including the mega construction projects of almost (PKR 26.4bln) out of which projects worth of PKR ~20bln has been Completed whereas remaining projects worth of PKR ~6.4bln is in progress with other Government and semi Government Departments, which includes re-construction, up-gradation of main runway (18l/36r) at Allama Iqbal international airport, dualization of Indus Highway (n-55), and construction of bf tower package 1 Jinah Avenue Islamabad.

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.