Entertainment Pakistan Limited

RATING REPORT | May-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
13-May-26 BB A3 Stable Maintain -
16-May-25 BB A3 Stable Maintain -
16-May-24 BB A3 Stable Maintain -
16-May-23 BB A3 Stable Maintain -
23-May-22 BB A3 Stable Initial -
About the Entity

Entertainment Pakistan Limited (incorporated in 2011; converted to a public unlisted company in 2019) is headquartered in Lahore. Shareholding is evenly distributed among three sponsors, with shares held in the names of their respective spouses. The Board comprises six members, including two independent directors. The Company’s principal activities encompass the leasing and subleasing of commercial properties, as well as residential real estate development.

Rating Rationale

Entertainment Pakistan Limited ("EPL" or "the Company") enjoys two streams of income: rental and through the sale of developed properties. The company earns sublease income by subletting buildings that have been taken on Lease from DHA under the first pivot, and develops its own real estate projects under the second pivot. EPL’s maiden residential project, "Dawood Homes," has been fully completed and sold out. Its second project, "Roshan Homes," has experienced significant delays, with construction stalled at approximately 8% completion as of March 2025, owing to the non-receipt of the second tranche of investment from REALL Limited UK, a matter entangled in legal formalities and further complicated by the prevailing international environment. Separately, the Company is advancing "Urban City Apartments" (47 triple-storey houses, 5 Marla each, at Urban City Muridke), where model units have been constructed. Two additional pipeline projects, "Rio Villas" and "Rio Homes", remain under discussion. During FY25, EPL reported revenue of PKR 77mln, representing a decline of 62% from PKR 203mln in the previous year. The revenue primarily reflects sublease income, as the Dawood Homes development project has reached maturity, and no new housing units or projects were sold during FY25. Despite this contraction, gross profit margin improved to 44.0% (Jun-24: 36.5%). Net profit declined to PKR 11mln (Jun-24: PKR 37mln), with net margin compressing to 14.2% (Jun-24: 18.0%), largely due to the fixed nature of administrative expenses. The equity base strengthened modestly to PKR 129mln (Jun-24: PKR 118mln), while leverage improved to 21.0% (Jun-24: 28.8%) as total borrowings remained broadly stable. The liability structure is primarily comprised of lease obligations and director-supported funding, with no significant reliance on commercial borrowing. During FY26, the Company acquired an additional plaza under the same lease-and-sublease model, which is expected to contribute to revenues within the current financial year, thereby partially offsetting the decline in development-related income. In addition, the Urban Homes project is in advanced stages of launch and, together with the newly acquired asset, is expected to enhance income visibility and support recurring cash flows from FY26 onwards. The assigned rating reflects EPL’s niche presence in affordable housing, successful completion of Dawood Homes, low leverage, and adequate interest coverage. The Company operates without conventional bank financing, relying instead on director funding and internal resources, which supports financial discipline and removes formal debt servicing requirements. However, governance constraints persist, with the planned registration as a Real Estate Management Company (RMC) with SECP still pending, limiting access to broader capital markets.

Key Rating Drivers

The rating remains sensitive to EPL’s ability to secure funding for Roshan Homes, launch new projects, improve cash conversion from inventory and receivables, and further strengthen its governance framework.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Entertainment Pakistan Limited


Rating Analysis

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Profile
Legal Structure

Entertainment Pakistan Limited is a public unlisted company with its registered office located at H-160/2 Commercial Phase 1 DHA, Lahore, Punjab. The principal activities of the Company are to take buildings on lease and sublease them, as well as real estate development.


Background

The Company was incorporated on July 4, 2011 as a private limited company under the Companies Act, 2017 and later on November 12, 2019, the status of the Company was changed from private to public unlisted. The Company was primarily established to explore sustainable living options for the economically less fortunate class of society.


Operations

The Company has two primary streams of income: lease rental income and real estate development. In the first pivot, EPL obtains access to properties requiring innovative solutions and restructures them. The Company currently has 2 buildings on this model in Lahore, obtained on lease from DHA under a 30-year agreement. The Company further sublets these buildings to different companies and earns sublease income. In the second pivot, the Company develops its own real estate projects. Dawood Homes and Roshan Homes are two such projects of the Company.


Ownership
Ownership Structure

Shares of EPL are almost equally divided among three partners (held in the names of their wives). Wives of Mr. Raza Khan and Mr. Ubaid Zafar hold 32.50% each, while the wife of Mr. Imran Hafeez holds 30%, and the remaining 5% is held directly by Mr. Imran Hafeez.


Stability

The ownership structure of the Company is assessed as weak, as there is no comprehensive partnership agreement in place to address issues of succession planning. This remains an unresolved vulnerability.


Business Acumen

The business acumen of sponsors appears adequate. Mr. Raza Khan, COO of Zaitoon Group, has over 20 years of experience as a property developer and consultant with companies such as Pace Pakistan Ltd, Pace Barka Properties Ltd, and Taavun Pvt. Ltd. Mr. Imran Hafeez, Group Finance Head at PACE Pakistan, also has extensive experience in fund raising, feasibility analysis, pricing architecture, capital investments, budgeting, cost management, and project valuation.


Financial Strength

There remains room for improvement in the financial strength of the Company, as it is not backed by any significant financial group.


Governance
Board Structure

Currently, the Company has a six-member board including two independent directors. Mr. Raza Ahmad Khan chairs the Board.


Members’ Profile

The majority of board members are from the corporate sector, possessing a diversified range of experience and expertise across engineering, finance, and sales & marketing.


Board Effectiveness

The Board is considered well-structured, comprising qualified and experienced professionals, with two functional committees: the Audit Committee and the Human Resource Committee. However, meeting minutes are not formally documented in a structured manner, and the Board has not been fully deployed in its true essence. Additionally, executive directors are not full-time employees on the premises, which may limit the effectiveness of strategic oversight.


Financial Transparency

M/s. Nasir Javaid Maqsood Imran are the external auditors of the Company. The auditors are QCR-rated and classified in Category "B" of the SBP Panel of Auditors. For FY25, the financial statements 


Management
Organizational Structure

The Company has an adequate organizational structure, currently divided into four main functions: 1) Operations, 2) IT, 3) Finance & Accounts, and 4) HR.


Management Team

Mr. Raza Khan spearheads management operations. He is a mechanical engineer from GIK and holds an MS in Real Estate Development and Management from Heriot-Watt University. He is supported by an adequately enabled team. He oversees operations, while the finance side is managed by Mr. Imran Hafeez.


Effectiveness

Weekly construction meetings are held to review policies and progress of ongoing projects, attended by directors as well as construction and sales teams. Directors visit the office daily in the evening for a few hours. Day-to-day management on the ground is handled by the CFO, Mr. Asad Bajwa, and the Company Secretary, Mr. Yahya Khurram.


MIS

Manual reports generated on MS Office are currently used by management for decision-making. Work on a new ERP (Axiom) remains "in process" and has not yet been fully implemented.


Control Environment

The Company currently does not hold direct certifications for health, safety, and quality management, given its role as a real estate developer. However, management confirm that its key contractor, Global Construction Company, maintains the relevant certifications and compliance standards. The Company also has an internal audit function in place, supporting an overall adequate control environment.


Business Risk
Industry Dynamics

During FY25, property prices recorded modest growth amid gradual market stabilization, while steel and cement prices remained broadly stable, supporting cost predictability for developers. Easing macroeconomic indicators and lower interest rates in FY26 are expected to further strengthen the sector, complemented by supportive fiscal measures in the Federal Budget, including reduced withholding tax on property purchases, withdrawal of the 3–7% Federal Excise Duty, and reintroduction of tax credits on housing finance. However, the non-reinstatement of the capital gains tax exemption on REIT transfers limits potential growth in the organized REIT market. Collectively, these factors are expected to sustain construction activity and enhance investment prospects in formal real estate and REIT segments.


Relative Position

Most players in the real estate sector cater to high-end customers and elite-class accommodation. Very few companies are working to provide sustainable living solutions for the less economically fortunate class. Consequently, EPL has very few direct competitors, such as ICON Homes.


Revenues

During FY25, revenues recorded at PKR 77 million (FY24: PKR 203 million), a decline of 62%. This sharp decrease reflects the fact that the Company has sold out all units of the Dawood Homes project, with no new project yet contributing meaningfully to revenue. The Company's revenue base has therefore contracted significantly.


Margins

Gross profit margin improved to 44.0% during FY25 (FY24: 36.5%), indicating strong cost control on the remaining inventory sold. Operating profit margin stood at 19.3% (FY24: 25.8%), while net profit margin was recorded at 14.2% (FY24: 18.0%). The compression in net margins is attributable to the fixed nature of operating expenses due to lower revenue


Sustainability

The Company currently has two projects in the pipeline:
Roshan Homes – ongoing, currently at approximately 8% completion as of March 2025, with an original completion timeline of June 2027.
Pipeline Projects – Rio Villas (PKR 239 million) and Rio Homes (PKR 217 million) are under discussion, and the model houses for Urban City Apartments (47 units, estimated PKR 1.03 billion) are ready.


Financial Risk
Working capital

Working capital requirements are primarily driven by payables and receivables, with the Company largely relying on internal cash flows. The increase in working capital days is largely attributable to the Roshan project, which remains on hold, resulting in a temporary build-up in balances. Gross working capital days stood at 2,073 days as of June 2025 (FY24: 722 days), driven by higher inventory holding periods. Trade payable days increased to 1,407 days (FY24: 515 days), resulting in net working capital days of 666 days (FY24: 207 days). Trade receivables days deteriorated to 1,204 days (approximately 3.3 years), reflecting collection delays linked to the same project. Short-term trade leverage stood at 35.8% (FY24: 32.8%), while short-term total leverage stood at 37.1% (FY24: 33.3%. Despite this, operational expenses are largely being met through internal cash generation, supplemented by periodic support from directors as required.


Coverages

As of June 2025, FCFO stood at PKR 11.5 million (FY24: PKR 49 million), a decline of 76%, reflecting lower profitability. Finance cost decreased to PKR 1 million (FY24: PKR 4 million) due to lower interest rates and reduced borrowing. Consequently, the interest coverage ratio remained strong at 12.8x (FY24: 13.5x), while FCFO to finance cost stood at 7.8x (FY24: 12.2x).


Capitalization

Leveraging (debt to debt plus equity) decreased to 21.0% at June 2025 (FY24: 28.8%), reflecting improved equity retention and flat borrowings. The Company has no funded or non-funded facility from banks other than finance lease liabilities of approximately PKR 1.6 million for vehicles. The Company has an equity base of PKR 129 million. Short-term borrowings in the form of loans from individuals amount to PKR 6 million at interest rates up to 24% per annum, along with loans from directors amounting to approximately PKR 113 million clubbed in "other payables."
 
 

May-26

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Entertainment Pakistan Limited


Financial Summary

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(PKR mln)


 Jun-25
12M		 Jun-24
12M		 Jun-23
12M
A. BALANCE SHEET
1. Non-Current Assets 20 16 17
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 445 501 383
a. Inventories 185 183 201
b. Trade Receivables 234 276 144
5. Total Assets 465 517 400
6. Current Liabilities 280 334 257
a. Trade Payables 276 320 254
7. Borrowings 29 29 30
8. Related Party Exposure 6 19 18
9. Non-Current Liabilities 21 16 12
10. Net Assets 129 118 82
11. Shareholders' Equity 129 118 82
B. INCOME STATEMENT
1. Sales 77 203 97
a. Cost of Good Sold (43) (129) (65)
2. Gross Profit 34 74 32
a. Operating Expenses (19) (22) (20)
3. Operating Profit 15 52 12
a. Non Operating Income or (Expense) 2 3 7
4. Profit or (Loss) before Interest and Tax 17 55 19
a. Total Finance Cost (1) (4) (7)
b. Taxation (5) (15) (4)
6. Net Income Or (Loss) 11 37 9
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 11 49 15
b. Net Cash from Operating Activities before Working Capital Changes 11 49 15
c. Changes in Working Capital 4 (48) 13
1. Net Cash provided by Operating Activities 15 1 27
2. Net Cash (Used in) or Available From Investing Activities (2) 3 (2)
3. Net Cash (Used in) or Available From Financing Activities (14) (1) (36)
4. Net Cash generated or (Used) during the period (0) 3 (10)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -62.0% 109.1% 5.7%
b. Gross Profit Margin 44.0% 36.5% 33.3%
c. Net Profit Margin 14.2% 18.0% 8.8%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 19.4% 0.3% 28.2%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 8.8% 36.5% 11.1%
2. Working Capital Management
a. Gross Working Capital (Average Days) 2073 722 1243
b. Net Working Capital (Average Days) 666 207 364
c. Current Ratio (Current Assets / Current Liabilities) 1.6 1.5 1.5
3. Coverages
a. EBITDA / Finance Cost 12.8 13.5 2.1
b. FCFO / Finance Cost+CMLTB+Excess STB 6.0 10.5 1.8
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 3.4 1.1 6.5
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 21.0% 28.8% 37.4%
b. Interest or Markup Payable (Days) 0.0 0.0 0.0
c. Entity Average Borrowing Rate 3.8% 8.2% 10.1%

May-26

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Entertainment Pakistan Limited


Rating Scale

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May-26

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Entertainment Pakistan Limited


regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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  3. Conduct of Business
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