PACRA Maintains the Entity Ratings of Etimaad Engineering (Pvt.) Limited

The ratings demonstrate Etimaad Engineering (Pvt.) Limited (“the Company” or “Etimaad”) strength, emanating mainly from its sustained operational history. Etimaad has delivered multiple, private infrastructure projects specifically in Oil and Power sector, on standalone basis as well as in collaboration with different JV partners with completion spanned over several years. The pipeline is good; therein for the sake of sustainable long-term growth, management follows a balanced approach aiming to gain more share in different lines of businesses. The strength of the business is evident in its esteemed clientele, which includes some of the prominent names in the industry. The entity is following a pyramid strategy; the top being mega projects (EPC), followed by construction and lastly maintenance related projects. Overhead cost being successfully covered with the re-occurring nature of O&M Contracts. The construction industry’s business risk profile in general, and specifically development in oil and power sector, is considered high due to its cyclical nature, volatile economic environment, low investments, along with exit of few blue-chip companies (multinational and local) from Pakistan. Resultantly, leading to capsizing of industry wide revenues. The sector also faces a significant cost overrun risk due to the inflationary pressure. However, the Company follows a conservative approach towards procurement of material while being involved in construction services. Hence hedging the fluctuation in raw material prices. Consequently, posting a limited topline. The margins of the Company showed resilience against the challenging environment and remain consistent with previous periods. The equity base of the Company is decent reported to PKR 1,763mln as of 9MFY24 with a moderately leverage financial profile - 26% in 9MFY24 (FY23: Approx. 25%), of which a major portion consist of short-term borrowings. Being an integral part of the business model, the Company also availed non-funded lines from banks in the form of guarantees. To capitalize geographical opportunities, Etimaad is strategically expanding into the Middle East and has established its first subsidiary in the KSA. To navigate the complexities of this new market and ensure a successful entry, the Company has collaborated with established local partners. Once fully operational, the subsidiary is expected to significantly boost the Company's future revenue. This strategic move will, along with regional diversification, hedge the local uncertainties posed by the challenging economic environment, including currency devaluation, import restrictions and others. Further Etimaad is also shifting its focus towards oil-based government lead projects. This will enable the Company to maintain a sound project pipeline and drive sustained long-term growth.
The ratings are dependent on the sustainability of the business and its financial structure; sustaining a steady revenue stream and financial risk profile. Financial risk metrics need to be upheld along with successful award of projects under bidding stage, specifically the execution of geographical expansion, are crucial for growth.

About the Entity
Founded in May 2007, Etimaad is an integrated engineering and contracting firm offering turnkey, retrofit, and debottlenecking solutions for the power and oil & gas sectors, along with project management, industrial construction, and shutdown services. The two-member board is chaired by Mr. Mohammad Sohail Shafique, an Engineer with over 30 years of experience, holding a 25.6% stake. The Ansari family owns 37.4%, and Mr. Farooq Hussain Mughal, President & CEO, holds 26.9%. Grant Thornton Anjum Rehman serves as the Company’s external auditor.