The Pakistan Credit Rating Agency Limited
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Muhammad Zain Ayaz

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PACRA Maintains Rating of Multinet Pakistan (Pvt.) Limited

Rating Type Entity
(01-Aug-23 )
(02-Aug-22 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Pakistan’s technology sector contributes ~1% to the national GDP and stood at approximately PKR~647bln in FY22 (FY21: PKR~485bln), with the domestic market size for technology products and services estimated to be PKR~273bln in FY22 (FY21: PKR~218bln). Meanwhile, during FY22, exports of the total technology industry increased to PKR~374bln (FY21: PKR~267bln). In recent years, the Government has enhanced its focus on the tech industry and recognized the potential for growth and investment that exists. The Ministry of Information Technology & Telecommunication (MoITT), has taken various steps such as the establishment of IT Parks nationwide to promote the industry and provide an enabling ecosystem for businesses and start ups.
The ratings assigned to Multinet Pakistan (Pvt.) Limited reflects a good management profile with experienced individuals who have been a part of the company for many years. The Company has one management committee in place, which includes all the departmental heads, and policies, procedures, budgets and key performance parameters are discussed in the committee meetings regularly to review activity. With an optical fiber network footprint of ~13,500 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 with low leveraged capital structure represented through a debt-to-capital ratio of ~25.3% as at CY22 (3MCY23: 25%). The net profit margin have decreased to 1.4% in 1QCY23 (CY22: 6.3%). While working capital (CY22: ~52 days | 3MCY23: ~81 days) remains stretched in terms of gross working capital. In addition, 25% of cellular traffic and 50% of financial market traffic runs through Multinet Pakistan Pvt. Limited. Moreover, the company is committed to enhance the governance frameworks where the Board was enhanced to include 5 members from 2 members beforehand, including 2 Independent directors, and a formal internal control mechanism was established. The appointment of independent directors enhances the transparency of the company, contributing positively to its corporate governance practices. The company has strong financial transparency due to the appointment of EY and Baker Tilly as their internal and external auditors.
The ratings are dependent on the management's ability to realize the projected margins, and its strong capital structure. Prudent management of working capital cycle and coverage ratios remains imperative. 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 a major shareholder, having a 99.9% stake. Whereas, Mr. Adnan Hayat Zaidi heads the Company as the CEO. 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. Moreover, it also provides value added services such as voice services, data center, audio and video conferencing, hosting applications and servers.

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.