PACRA Maintains the Entity Ratings of Habib Construction Services Limited

Habib Construction Services Limited (“HCS” or “the Company”) has established a strong presence and brand reputation in the construction industry through decades of successful operations, with a proven track record of successfully completing numerous public and private sector projects. HCS primarily undertakes large-scale infrastructure works in collaboration with joint venture partners, including Chinese, Japanese, and local contractors. More recently, the Company has diversified its focus toward multilateral-funded and smaller-scale projects. Operating on a tender-based income model, HCS’s revenue depends on its ability to secure new contracts. The Company’s financial position remains closely linked to efficient project execution and timely completion. As per industry practice, HCS relies significantly on non-funded banking lines and supplier credit for its operations, while maintaining minimal funded obligations. The Company possesses a sound equity base, particularly in relation to its non-funded exposures. During FY25, HCS secured a substantial number of new projects—some completed and others in progress—which are expected to generate revenues over the coming years. As of 1HFY25, the topline stood at PKR 7,047mln (FY24: PKR 17,933mln; FY23: PKR 5,562mln). Profitability improved, with gross margins rising to 14% in 1HFY25 (FY24: 12.3%; FY23: 7%), and net margins increasing to 5.1% (FY24: 0.8%; FY23: -8.7%). The assigned positive outlook reflects improved financial performance and a sound project pipeline; however, the timely completion of audited financials and maintenance of key financial metrics remain important considerations for a potential rating upgrade. Regarding ongoing claims and disputes associated with the Lahore Orange Line Metro Train Project (Package-1), the Company remains optimistic about a favorable resolution, which could strengthen liquidity.
Expansion of HCS’s business is expected to strengthen its risk profile. However, the Company’s ratings remain sensitive to the cyclical nature of the construction sector and overall economic volatility. Timely project execution, resolution of pending claims—particularly those related to the Orange Line Metro—and efficient revenue collection will be critical for maintaining liquidity and financial stability. Any significant delays or disruptions in major projects, especially those associated with Bahria Town, could pose risks to the Company’s ratings. Improvement in governance practices also remains a key consideration.

About the Entity
HCS 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, Kalma Chowk underpass & overhead bridge, Metro Bus projects in Islamabad, Lahore and Faisalabad, etc. 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.