logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
02-Dec-21

Analyst
Muhammad Mubashir Nazir
mubashir.nazir@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Kingcrete Builders

Rating Type Entity
Current
(02-Dec-21)
Previous
(03-Dec-20)
Action Maintain Upgrade
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Kingcrete’s extensive experience in the civil construction business. The firm has exhibited renewed energy ever since the induction of the second generation. The ratings reflect Kingcrete’s improved business fundaments as anticipated, with growth in revenue and margin. During FY21, the top line witnessed a growth of 82% (FY 21: 5.4bln, FY20: 2.98bln). The gross profit and net profit margins remained at 19% and 4.2% respectively (FY 20: 20% & 2.7%), aided by good repute in the market and extensive experience of the management. As the entire income is tender-based, revenue depends on the firm's ability to bid successfully. Therefore the working capital requirement also depends on the project in execution; wherein performance guarantees are essential. This leads to a high dependence on bank lines to fund working capital. The firm is adequately leveraged and the performance rests with projects in hand and timely completion. The equity base is strong and is mostly represented by a portfolio of investment property indicating sound loss absorption capacity; the same along with available cash balances and ongoing projects which span a number of years ensuring revenue generation in the coming years, support the financial risk profile of Kingcrete.
However, an upsurge in basic raw material prices and increased policy rates are posing a challenge. The ratings will remain dependent on upholding financial metrics involving the timely completion of key commercial projects without any significant cost and time overruns. In addition, maintenance of a healthy project pipeline and collection efficiency, as projected, will remain crucial to ratings. Governance and corporate structure require up-gradation and improvement and so does financial discipline. The management has an express mandate to corporatize its structure while improving the reporting of its financial performance on a quarterly and annual basis.

About the Entity
Kingcrete was established in 1976 and since its inception has undertaken projects in all major fields of civil engineering and allied electrical works. Kingcrete Builders is registered as a partnership concern with five partners. The founder-Mr. Nawaz A Minhas and his brother, Mr. Ijaz A Minhas are senior partners, with his two sons, Mr. M Nadir Minhas and Mr. M Sikander Minhas, and his relative Mr. Saeed A Malik, as partners of the firm. Mr. Hassan Raza is the new induction of the management team, joined as the Chief Financial Officer of Kingcrete. He holds 40+ years of experience, has been in the management role of Sharif sugar, PCB, and some other renowned organizations. The registered office is situated at 2-C south Park Avenue, Phase-2, Defense Housing Authority, Karachi.

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.