Muhammad Mubashir Nazir
PACRA Maintains Entity Ratings of Kingcrete Builders
The ratings reflect Kingcrete Builders (“Kingcrete” or “the Company”) extensive experience in the civil construction business. The firm has no limit license and is registered with Pakistan Engineering Council Board. Kingcrete has delivered multiple, public and government projects of which the completion spanned a number of years. During FY22, the top line witnessed a decline of 49% (FY 22: 2.7bln, FY21: 5.4bln), and the gross profit and net profit margins also reduces, reported to 18% and 0.9% respectively (FY 21: 19% & 4.2%). The shrinkage in margins along with a slowdown in the progress of the projects and recoveries were witnessed due to the upsurge in basic raw material prices and increased policy rates. The firm has requested the cost escalation against the already-in-hand projects, the negotiations of which are underway. The firm in order to recoup the declining margins planned for the development of its land bank in Rawalpindi, as well projects spanning a short duration of time were also added to its basket. Management believes that this will help them to maintain its profitability. Kingcrete as a re-strategizing initiative also started to build its footprints in supervisory and designing work, few projects were also sourced under this direction. This will help the firm to explore its expertise in an altered way. The entire income of the firm 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.
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, the 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.
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. The registered office is situated at 2-C South Park Avenue, Phase-2, Defense Housing Authority, Karachi.