PACRA maintains Entity Ratings of Entertainment Pakistan Limited

Entertainment Pakistan Limited (EPL or the Company) enjoys two streams of income – Rental and through sale of developed properties. The company earns sublease income by subletting buildings that have been taken on Lease from DHA under first pivot, and develops its own real estate projects under second pivot. In the developmental model, EPL transfers ownership as well as possession of apartments after installments are received completely. The company purchases land on a deferred payment model for its projects and starts construction before the transfer of land ownership which creates the risk of land ownership disputes. Company’s first real estate venture, “Dawood Homes”, located near Dream Gardens in Lahore, offering accommodations on 5 marla plots, has been successfully completed with the sale of 100% homes under the project. Whereas, Roshan homes project construction is put on hold due to pending receipt of 2nd tranche of investment from REALL Limited UK, primarily impacted by prevailing macroeconomic conditions and the downturn in the real estate sector. During 6MFY25, revenues were recorded at PKR ~35mln (FY24: PKR ~203mln). The current year's income reflects only the rental income since there is no development towards the second stream of income due to lack of fund. Matching with the development of Roshan Home, the Company deferred the payment of land to the society in consultation with the owner of the society. However, any prolonged delay may cause a risk. Resultantly, the Company experienced a slight decline in gross margins, representing the delta of the sublicense and license fee paid to DHA. Net margins were also squeezed due to trickle-down effect. EPL is not exposed to any significant financial risk as it does not have significant borrowings from banks. It instead borrows from sponsors and their close relatives. Completion risk and inflation risk of the company is low as units are constructed and handed over on a batch basis, which gives it flexibility over price setting. The company is committed to complete first building of Roshan Homes soon and has 1 more project of 'Urban homes' in Urban City which is in the pipeline on a similar model in already developed societies. The project aims to construct 50 residential units, each measuring 5 marla. The entire development will be financed through internal funds provided by the Company.
Ownership of land and adequacy of financial strength remain crucial for the company. Timely completion of the projects along with delivering promised quality to develop positive brand image and timely collection from customers against sale of apartments are important. Governance and corporate structure require improvement and so does financial discipline.

About the Entity
Entertainment Pakistan Limited is a public unlisted company incorporated in 2011, with shares almost equally divided among group of highly qualified and experienced individuals. The BoD consists of sponsors as well as 2 independent directors.