PACRA Maintains Entity Ratings of New Horizon Computer

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 9MFY23, exports of the total technology industry increased to PKR~377bln (FY22: PKR~374bln). The sectors are expected to continue growing at an CAGR of ~36%. Pakistan’s IT exports have grown exponentially over the last 5 years with a growth of 137%. The largest contributor remains IT consultancy (~33%), followed by software exports (~25%). The industry comprises ~ 7000 companies providing customized software development services and Business Process Outsourcing (BPO) services. In recent past, the Government and regulatory bodies have started to take initiatives such as the establishment of IT Parks and incubators to promote the industry and provide an enabling ecosystem for businesses and start-ups.

The ratings reflect New Horizon Computer's ('the Business') evolving business profile as an information technology (IT) services and solutions provider. The business offers a range of IT-based solutions, encompassing cloud computing, data protection, backup & recovery, networking hardware & software, and ERP systems management. The Business also provides Service Legal Agreements (SLAs) for repair, maintenance, and refurbishment services. With a small market share, revenue is generated from the local market only and posts considerable growth during FY23, The Business posted revenue of 2,808mln (FY22: 2,315mln). Effective cost management and operational efficiency have contributed to increase in margins (NP margin, FY23; 13%, FY22; 10%) and consequently enhancing the profitability of the Business. The financial risk profile exhibits strong coverages, although it carries an extended working capital cycle (FY23; 169days, FY22; 142days). Additionally, the capital structure is moderately leveraged (FY23: 60%, FY22: 59%). If supplemented by borrowings from the Sponsors, this would provide support. However, Sponsors' sound business acumen positively contributes to the overall rating outlook.
The ratings are dependent on the management's ability to diversify the revenue stream by global outreach along with stabilizing margins and profitability. However, improving financial profile of the Business remains crucial. Meanwhile, strengthening governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will have a negative impact on ratings.

About the Entity
New Horizon Computer ('the Business') is an association of person (AoP). The Business was registered in 2003, and is owned by Mr. Hanif Akbar Ali (~51%) and Mr. Rahim Iqbal (~49% , CEO). The primary business activity involves the provision of IT based solutions. Management team comprises qualified professionals having significant experience in respective fields.