The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of Zahir Khan & Brothers

Rating Type Entity
(31-Jan-23 )
(02-Feb-22 )
Action Maintain Maintain
Long Term A A
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Zahir Khan & Brothers' (ZKB) financial & business strength. ZKB is known for undertaking large infrastructure projects on standalone basis as well as in collaboration with different JV partners. It is one of the leading contractors of Pakistan with its projects mostly financed by foreign funding agencies. ZKB is led by Zahir Khan and family - a name well known in the construction industry. The firm faced a period of low contracting activity in past few years due to muted growth in the construction industry during and post Covid-19 times and change in political landscape. However, the financial growth is expected to rebound as the firm has been awarded a number of projects in recent months including a few gigantic Public-Private Partnership (PPP) projects which shall translate into vigorous and sustainable numbers going forward. ZKB has booked net profit of PKR 314 mln in 3MFY23 (FY22 : PKR 1,334 mln; FY21: PKR 902 mln; FY20: PKR 3,996 mln). Being an integral part of business model, the firm meets its business funding needs by non-funded lines of banks and suppliers’ credit mostly, however, it has also started procuring short-term borrowings recently to support its working capital requirements. The non-funded exposure is expected to increase with increasing project base, however, comfort can be drawn from rich equity base and investment property bank of the firm.
The ratings are dependent on the upcoming big projects undertaken by management for sustainability of the business and financial structure of ZKB. Governance and corporate structure is evolving to be complied with best practices and improved financial transparency as management has expressed its mandate to corporatize the firm’s legal structure. Financial metrics need to be upheld as well.

About the Entity
Zahir Khan & Brothers is established in 1970. ZKB, as among the large players in construction sector, currently nurtures projects that span across such diverse segments of the construction industry, all of which impact the nation of Pakistan, and the progress of its people. M/s. RSM Avais Hyder Liaquat Nauman Chartered Accountants, is the external auditor of the firm. The auditors have expressed an unqualified audit opinion on the financial statements of Zahir Khan & Brothers for the year ended June 30, 2022. With over hundreds of projects, ZKB’s portfolio has covered the entire spectrum of construction work in every corner of Pakistan. ZKB is registered as a Partnership firm and owned by 4 Partners. Mr. Zahir Khan, the key founder and CEO of ZKB, with deep hands-on knowledge, and extensive construction industry experience of nearly 4 decades owns 51%, Mr. Mohabbat Khan owns 41%, Mr. Suleman and Mr. Samiullah hold 4%each respectively.

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.