Descon Engineering Limited (“DEL” or the “Company”) is an unquoted public limited company, incorporated in 1977 . The Company operates under the regulatory framework applicable to public companies in Pakistan and prepares its financial statements in accordance with IFRS as adopted in Pakistan. DEL’s legal structure supports participation in large-scale public and private sector contracts, particularly those requiring prequalification, bonding capacity, and long-term execution capability, which is evident from its ongoing portfolio and exposure to government-linked awarding entities.

Over several decades, DEL has established itself as a major engineering and construction contractor with experience spanning infrastructure, energy, industrial, and process-related projects. The Company’s operational footprint includes both domestic and international markets, enabling diversification across geographies and client profiles. This long operating history has allowed DEL to develop institutional knowledge, technical depth, and execution systems suited for complex, multi-year projects, which is reflected in its ability to sustain a large backlog while continuing to secure new awards.

DEL operates as an integrated engineering solutions provider, offering services across the full project lifecycle, including engineering design, procurement, manufacturing, construction, commissioning, and maintenance. The Company’s operations are supported by established manufacturing facilities and site infrastructure, allowing internal control over critical components of project delivery. This vertically integrated operating model enhances execution reliability but also increases exposure to cost control, working capital intensity, and timely client certifications, all of which directly influence profitability and cash flow generation.

DEL is a family-owned company, with ownership vested in the Dawood family. The sponsors maintain active involvement in strategic oversight and governance, ensuring alignment between ownership objectives and long-term business strategy. The concentrated ownership structure facilitates decision-making efficiency and strategic continuity, particularly important in a capital-intensive and contract-driven business such as engineering and construction.

Descon Group operates a diversified and resilient engineering platform with over four decades of execution experience across nine geographies, serving sovereign, multinational, and industrial clients. The broad geographic and client base reduces concentration risk and mitigates exposure to localized economic cycles. Beyond EPC operations, the Group maintains complementary investments in chemicals, agriculture, and hospitality, providing recurring cash flows and earnings diversification. This scale, sectoral spread, and operating depth support sustainable business continuity and strengthen the overall stability of the Group’s risk profile.

The sponsors possess extensive experience across engineering, industrial operations, and large-scale project execution. This business acumen is reflected in DEL’s sustained ability to prequalify for complex projects, manage diversified execution risks, and maintain relationships with public sector entities, multinational clients, and development agencies. Sponsor expertise continues to underpin strategic positioning and risk management across cycles.

The Group provides tangible financial depth to Descon Engineering Limited through its scaled engineering platform. DEL Domestic recorded 56% year-on-year revenue growth to PKR 139 billion, while the overseas segment maintains a strong capital base with net equity of PKR 36 billion. Combined operations posted 45% revenue growth with continued backlog expansion. Foreign operations exhibit sound liquidity and debt servicing capacity, evidenced by a current ratio of 1.55x and interest coverage of 7.91x. These factors provide measurable balance sheet support and enhance consolidated financial resilience

The Board composition reflects a balanced governance structure, comprising executive, non-executive, and independent directors, including female representation. This diversity in oversight strengthens transparency, enhances independent judgment, and supports adherence to established corporate governance best practices.

Board members collectively bring experience in engineering, finance, corporate management, and strategy. This mix of technical and financial expertise enables informed oversight of project execution risks, capital allocation decisions, and financial performance, which are critical given the scale and complexity of DEL’s operations.

The Board provides structured oversight across operational, financial, and strategic matters, supporting disciplined governance and accountability. The Company’s governance framework is aligned with internationally recognized practices, and periodic independent third-party assessments have reviewed its sustainability and governance systems, with overall outcomes considered satisfactory. This external validation reflects continued strengthening of governance processes and supports institutional confidence in the Company’s oversight environment.

Crowe Hussain Chaudhury & Co., Chartered Accountants, act as the external auditors and have issued an unqualified opinion on the Company’s financial statements, reflecting adherence to applicable accounting and reporting standards. In parallel, the internal audit function is outsourced to KPMG Taseer Hadi & Co., Chartered Accountants, which conducts independent, risk-based reviews of internal controls, operational processes, and governance practices. This layered assurance framework strengthens oversight, enhances control reliability, and supports the integrity of financial reporting.

DEL operates under a clearly defined organizational structure with functional segregation across finance, strategy, information systems, internal audit, human resources, legal, and corporate affairs. This structure supports operational control, financial discipline, and compliance across geographically dispersed projects and business units.

The Company is led by an experienced senior management team with long tenures within the organization and deep familiarity with DEL’s operating model. Management experience spans project execution, manufacturing, marketing, and corporate leadership, enabling continuity in execution and strategic focus.

Management has demonstrated the ability to execute large-scale, technically complex projects while maintaining operational continuity. The sustained growth in revenues and the ability to manage a sizeable backlog indicate effective execution capability, although margin performance and cash flow volatility highlight ongoing challenges inherent in the sector.

The Group has initiated the implementation of SAP S/4HANA across both local and overseas engineering operations, marking a transition toward a more integrated and digitally enabled operating platform. The upgraded system is expected to enhance data integrity, provide real-time visibility across projects, automate processes, and strengthen internal control effectiveness. This evolution of the MIS framework supports improved governance, cost monitoring, and informed decision-making across geographically dispersed operations. 

The Company operates under established Quality, Health, Safety, and Environment (QHSE) frameworks and holds internationally recognized certifications, including ISO 9001, ISO 14001, and OHSAS 18001. These systems support compliance with regulatory requirements and mitigate operational and safety risks inherent in engineering and construction activities.

The engineering and construction sector remains closely linked to public sector development spending, infrastructure initiatives, and energy-related investments. Demand conditions are supported by ongoing government-led projects; however, sector dynamics remain sensitive to fiscal constraints, funding availability, and execution delays, which can affect project timelines and cash flows.

DEL is among a limited group of contractors registered in the PEC CA category, allowing participation in large and complex projects. This positioning provides a competitive advantage in bidding for high-value contracts and supports sustained backlog generation, as reflected in the Company’s ongoing project portfolio.

During FY25, DEL reported revenue of PKR 42.8 billion, reflecting a year-on-year increase driven by execution of existing projects and partial recognition from newly awarded contracts. As on 31-Dec-2025, the Company’s total project portfolio stood at PKR 188.9 billion, with remaining revenue to be booked at PKR 88.0 billion. Revenue recognized during Jul–Dec 2025 amounted to PKR 18.1 billion, providing visibility into near-term earnings while underscoring dependence on timely execution and client certifications.

Gross margins remained moderate at 10.5%, consistent with the competitive and fixed-price nature of large-scale EPC contracts, while net profit margin stood at 2.0%. Despite structurally lean sector margins, the Company benefits from a robust enterprise risk management framework that actively monitors project-level execution risks and mitigates potential cost overruns or delays. Furthermore, contractual protections through escalation clauses, variation orders, and claims mechanisms provide a natural hedge against macroeconomic volatility and input cost fluctuations, supporting margin stability and earnings resilience.

The sizeable backlog and diversified project mix provide medium-term revenue visibility. However, sustainability of earnings remains linked to execution efficiency, working capital management, and the ability to protect margins amid inflationary pressures and competitive bidding. Continued order replenishment and disciplined project management are critical to sustaining performance.

DEL’s operations are inherently working-capital intensive, driven by high receivables and inventory requirements. As at Jun-25, trade receivables stood at PKR 13.3 billion, contributing to elevated gross working capital days of 91 days and net working capital days of 57 days. The current ratio of 1.0x indicates tight liquidity, with reliance on short-term borrowings and internal cash flows to fund operational needs.

Cash flow coverage metrics weakened during FY25, with FCFO of PKR 4.8 billion and FCFO-to-finance cost of 0.7x, reflecting pressure from working capital movements. EBITDA-to-finance costs remained adequate at 4.4x, while debt payback stood at 1.7 years.

DEL’s capital structure remains moderate and primarily working capital driven, with total borrowings representing 34.4% of capitalization as at Jun-25. Shareholders’ equity stood at PKR 18.3 billion against total assets of PKR 58.0 billion, providing a comfortable equity cushion. The debt profile is largely short-term in nature, with no material long-term obligations or restrictive covenants, thereby preserving financial flexibility and limiting structural refinancing risk. Borrowings are principally utilized to bridge project-related working capital cycles typical of EPC operations. While average borrowing rates reflect the prevailing interest rate environment, the effective financing cost remains manageable at approximately 3% of revenue, indicating contained debt servicing burden.