The Pakistan Credit Rating Agency Limited
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Ahmad Faraz Arif

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PACRA Maintains Entity Ratings of Engro Corporation Limited

Rating Type Entity
(25-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Engro Corporation Limited's ('Engro Corp' or " the Company") very strong risk profile and exceptional liquidity. The ratings incorporate established position of the Company as a conglomerate with a diverse pool of investments under four verticals: i) food and agriculture, ii) petrochemicals, iii) energy and related infrastructure, and iv) telecommunication infrastructure. Engro Corp's various investments in diversified sectors have witnessed phenomenal growth in financial performances, lately.
Respective businesses under the umbrella of the HoldCo continued growth trajectory despite challenging economic environment exhibiting resiliency and strength of HoldCo's investment philosophy. Engro Fertilizer, being a prominent player in country's fertilizer sector, increased it's market share on the back of higher urea sales. Engro Eximp is consistently improving its market presence. Engro Polymer and Chemical has a fortified position in the local PVC industry with capacity enhancements, Hydrogen Per Oxide project on the cards, and opening up of export avenues. The subsidiary benefitted from high international PVC prices leading to significant improvement in margins. Engro Corp's sizeable investments in the energy chain, through Engro Energy, have progressed in a timely manner. Moreover, Engro PowerGen Thar is performing better than envisioned availability and efficiency benchmarks. Engro Enfrashare's telecom tower business is booming as the Company managed to grab considerable market share, through equity injection, and plans to double it, going forward. Lately, Engro Corp plans to enhance its footings in the petrochemical vertical by setting up a polypropylene facility. Furthermore, the Company also plans to expand its exposure in the renewable energy and LNG sectors.
The Company continues to enjoy consistent dividend income from its subsidiaries. Engro Fertilizer and Engro Polymer announced substantially higher dividends during CY21 compensating for no dividend income from Engro Energy and FrieslandCampina. Engro Vopak remained cash producer, as well. The Company has a low leveraged capital structure with very strong coverages and liquidity signifying its robust financial risk profile. It's ability to limit debt levels to fifty percent of its equity at group level provides comfort to ratings. The ratings factor in HoldCo's strong organizational structure, designed to control the strategic direction of its subsidiaries, and strong governance framework.
The ratings are dependent on the management's ability to execute its envisaged strategy of growth and expansion amidst prevailing economic environment. Sustainability in the performance of subsidiaries, stable dividends and effective management of financial profile is important. Meanwhile, effective utilization of liquid assets to enhance investment portfolio is critical.

About the Entity
Engro Corporation Limited is a public listed company. The principal activity of the Company is to manage investments in subsidiaries, associates and joint ventures. Dawood family holds around ~43% stake in Engro Corp, majority of which is through its corporates, whereas ~3% stake is owned through individuals of Dawood family. Mr. Hussain Dawood chairs the Board of Directors, whereas Mr. Ghias Khan is the President and CEO of the Company.

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.