The Pakistan Credit Rating Agency Limited
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Ahmad Faraz Arif

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PACRA Maintains Entity Ratings of Mega Conglomerate (Pvt.) Limited

Rating Type Entity
(14-Dec-22 )
(14-Dec-21 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect Mega Conglomerate (Private) Limited's ('the Company') association with Mega & Forbes Group of Companies, an established group with presence in energy, cement, shipping, logistics, real estate development, and food sectors. The Company operates under a holding company structure with an aim to acquire and consolidate some of the group's investments in energy, real estate, and food sectors. The rating incorporates the Company's sizable holding in The Hub Power Company Limited (HUBCO) and stake in Haleeb Foods (through Mega Foods (Pvt.) Limited.), investment properties (through Imperial Developers and Builders (Pvt.) Limited.) and bill aggregator services (through Paypro (Pvt.) Limited). However, lately, the Company has impaired its investment in Paypro (Pvt.) Limited. The Company primarily drives income from dividend stream of underlying investments. During FY22, the Company's dividend income from HUBCO witnessed significant increase resulting in improved financial performance compared to the prior years. HUBCO has strong presence in the power sector, with investments in Narowal Energy Limited, Laraib Energy Limited, and China Power Hub Generation Company, having a total combined installed power generation capacity of 2,921MW. The profitability was also relieved due to dividend inflow emanating from HUBCO. The Company incurs high financial charges from the debt acquired for financing the investment portfolio. The Company is highly leveraged, however, the debt is fully backed by liquid investments and securities including HUBCO shares. The equity base is strengthened on the back of equity injection and subordinated loan from sponsors/group companies. Going forward, a consistent dividend stream, which has been augmented by investments in energy sector, is expected to support the financial profile of the Company. Moreover, ratings draw comfort from the presence of sufficient liquid investments, in form of TDR's and TFC's, on the Company's balance sheet and expected support from sponsors, if required.
The ratings are dependent on the performance of existing strategic investments and the execution of their envisaged business strategies resulting in a regular dividend stream. Strengthening the governance framework would be important for the ratings.

About the Entity
Mega Conglomerate (Pvt.) Limited was incorporated as a private limited company in 2010 in Pakistan under the repealed Companies Ordinance, 1984. Mr. Habibullah Khan is the founder and Chairman of Mega & Forbes Group. Mega has strategic investments in the associated company - The Hub Power Company Limited (HUBCO) and in two wholly owned subsidiaries – Mega Foods (Pvt.) Ltd., and G4 Mega Pakistan (Pvt.) Ltd. (G4). The Company is owned by Mr. Habibullah Khan (~ 56%) and Mrs. Nusrat Khan (~ 44%). Mr. Habibullah is also the CEO of the Company, and Chairman of the Board. The registered office of the Company is situated in Karachi, Pakistan.

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.