The Pakistan Credit Rating Agency Limited
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Shujat Ehsanullah Wasim

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PACRA Maintains Entity Ratings of Engro Corporation Limited

Rating Type Entity
(23-Jun-23 )
(25-Jun-22 )
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Engro Corporation Limited's ("ECorp" or "the Company") has established its position as a conglomerate with a diverse pool of investments under five verticals: i) food and agriculture, ii) petrochemicals, iii) energy and related infrastructure, iv) telecommunication infrastructure, and v) international trading. The Company holds very strong risk profile with exceptional liquidity. ECorp's various investments in diversified sectors have witnessed sustainable growth in terms of financial performances and position, despite the ongoing economic crisis. Thus, exhibiting resilience and strength in the Company's investment philosophy. Engro Fertilizer (EFERT) continues to be a prominent player in the fertilizer sector, though the market share declined due to dip in the overall DAP market. Engro Eximp, basmati rice player, is still evolving and is yet to improve its market presence. Engro Polymer and Chemical (EPCL) has a fortified position in the local PVC industry with capacity enhancements, Hydrogen PerOxide project; however, import restrictions and global inflation has impacted the net performance. The Company holds considerable standing in the energy domain, through Engro Energy, and are progressing in a timely manner. 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. The Company plans to enhance its footings in the petrochemical vertical by setting up a polypropylene facility. Moreover, the Company may expand its exposure in the renewable energy and LNG sectors.
The Company continues to enjoy consistent dividend income from its subsidiaries. EFERT announced slightly lower dividends. While, EPCL shared substantial dividends during CY22. This was further supported by a dividend share from Engro Energy and Engro Elengy. Thus, compensating no dividend income from Engro Connect and FrieslandCampina. Engro Vopak remained a cash producer, as well. The Company has a low leveraged capital structure with very strong coverages and liquidity signifying its robust financial risk profile. Moreover, initiating share buyback during CY22 will further enhance ECorp's market valuation. The ability to limit debt levels to fifty percent of its equity at Group level provides comfort to ECorp's ratings. Also, factor in ECorp'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 ~47% stake in ECorp, majority of which is through its corporates, whereas ~6% 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.