The Pakistan Credit Rating Agency Limited
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Bazah Tul Qamar

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PACRA Maintains Rating of Habib Construction Services Limited

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

Habib Construction Services Limited has been in the construction industry for many decades. Company has delivered multiple, public and government projects of which the completion spanned a number of years. The Company mostly undertake large infrastructure projects in collaboration with different JV partners including Chinese and Japanese. Realization of disputed claims of ~PKR 3.6bln regarding Orange line project, delivered by the Company, can improve its liquidity. HCS is now focused towards multi-lateral financed and multiple small projects. Company has taken up a project of Construction Sheranwala Flyover, costing ~PKR 2.6bln, revenue spreading over two years till FY22. Along with pick up in construction sector and new projects, Company’s performance has followed an up surged trend and reported a net profit of ~PKR 33mln in FY21 (FY20: -104mln). However, to maintain its competitive advantage company needs to explore the new avenues. A heavy risk absorption capacity through sizeable equity provide comfort to the ratings. Company's rating reflects the necessity for securing more projects that could generate a sustainable revenue after FY22. Stoppage of various projects, related to Bahria town Islamabad for uncertain time period will remain critical to the ratings. High reliance on non funded short term lines shows an increasing liquidity pressure. Certainty of project pipeline, along with easing out the rating pressure, will initially increase the company's reliance on short term borrowing and non-funded lines. Meanwhile, timely release of funds from diversified projects will bode well for the company’s ability to pay its obligation.
The ratings are dependent on sustaining a steady revenue stream and maintaining a low leveraged capital structure . Any prolonged downturn in subdued business volume can negatively affect the ratings. Good corporate governance practice is considered essential.

About the Entity
Habib Construction Services (Public unquoted) Limited was established in 2009 and stands tall in the construction industry of Pakistan as the pioneer of "Fast Track" project execution culture. Significant construction projects to its credit are Lahore Ring Road, 2X2.5 MW hydel power project at Chashma, 17 storey Bahria Grand hotel, Benazir Bhutto international airport civil works, Beijing underpass Lahore, Kalima Chowk underpass & overhead bridge, Metro Bus projects in Islamabad, Lahore and Faisalabad, etc. HCS is registered as a public limited company. The CEO, Mr. Shahid Saleem, is considered the visionary leader behind the success of the company. The overall control of the company vests in three-member board of directors (BoD), all of whom have executive roles and there is no independent director.

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.