The Pakistan Credit Rating Agency Limited
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Shayan Farooq

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PACRA Assigns Initial Entity Ratings to Multinet Pakistan (Pvt.) Limited

Rating Type Entity
(02-Aug-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect Multinet Pakistan (Pvt.) Limited ('Multinet' or 'the Company') strong business profile as a telecommunications infrastructure & services provider. This is depicted by long term contracts achieved with major licensed telecom operators for the Indefeasible Right of Use of its cross-country optical fiber network, along with tower fiberization contracts. The product slate of the Company comprises provision of broadband & data connectivity related services to corporates, long-haul and metro optical fiber infrastructure requirements for telecom operators, international voice termination, fixed line telephony, and partnering with global carriers to provide broadband and data connectivity solutions to their customers operating in Pakistan. With an optical fiber network footprint of ~13,000 KM, the Company has experienced a rising top line over the years. Margins, and in turn profitability have remained adequate. Financial risk profile is characterized by improved coverage ratios with low leveraged capital structure. While working capital remains stretched in terms of trade leverage. The management is aiming to avail a long-term loan of PKR 2.1bln in order to expand its fiber footprint, procure more tower fiberization contracts and enhance its existing data centers capacities. Ratings draw comfort from partial credit guarantee of 75% of the principal amount of this loan (i.e. ~ PKR 1.6bln) to be provided by InfraZamin Pakistan Limited ('InfraZamin'). Moreover, the Company commits to enhance the governance & management frameworks, within a stipulated timeframe. On the governance front, the Board will be enhanced by minimum three (3) members, and a formal internal control mechanism will be established. In addition, Multinet will limit its exposure in associate concerns, in order to supplement its working capital cycle. And lastly, the Sponsor is committed to procure an equity injection of PKR 1bln in the Company in the next 24 months.
The ratings are dependent on the management's ability to realize the projected margins and profitability. Prudent management of working capital cycle and coverage ratios remains imperative. The ratings take comfort in the credit guarantee provided by InfraZamin. However, any significant delay in realizing the projected cashflows would have a negative impact on ratings.

About the Entity
Multinet Pakistan (Pvt.) Limited was incorporated in 1996, as a private limited company. Primary business activity of the Company is to provide telecommunications infrastructure and services. Mr. Adnan Asdar Ali is the major shareholder, having 99.99% stake. Mr, Adnan heads the Company as the CEO. The management team comprises qualified professionals having significant experience in respective fields.

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.