The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Maintains Entity Ratings of Etihad Alloys (Pvt.) Limited

Rating Type Entity
(01-Nov-23 )
(02-Nov-22 )
Action Maintain Upgrade
Long Term BBB- BBB-
Short Term A3 A3
Outlook Developing Developing
Rating Watch - -

Etihad Group is setting up a steel industrial unit in Rahim Yar Khan adjacent to its existing Sugar Mill – Etihad Alloys (Pvt.) Limited (EAPL). The unit will have steel melting capacity of 250,000 MT per annum. Primarily, EAPL will be engaged in manufacturing of Steel Billets. The Project is being financed through a mix of debt and equity in the ratio of 65:35. The Company has initiated the application process for obtaining the status of a Sole Enterprise Special Economic Zone. The public hearing pertaining to this application has already taken place, and the requisite governmental procedures are currently underway. The Company envisions that the application's outcome will be announced in FY-24. Afterwards, the Company will be well-positioned to immediately move forward with the Project and initiate its operations. EAPL has already executed the PPA with Etihad Power Generation Limited (EPGL) to meet its energy requirements. The in-house power generation will result in substantial cost-saving measure for the Company. Currently management has entered into the agreements with the financial institutions for financing facility of the EPGL, and is confident to start getting disbursements by the close of current calendar year. The operation of EPGL is expected to commence after 15 months from the first draw down. Moreover, the Company faced cost overruns of about PKR 1,000 million, primarily due to inflation and continuous devaluation of Pak Rupee against US Dollar. However, EAPL has successfully managed to bridge this gap with equal contribution of equity and debt. As of the end of Sep’23, Etihad Alloys has successfully paid three quarterly installments, totaling PKR 360 million, starting from Mar’23. It underscores the unwavering support of the company's sponsors, who have consistently injected funds whenever needed. Additionally, the Company maintains DSRA account providing coverage for three months on its financial obligations till maturity. Technical Associates Pakistan (Pvt.) Ltd is the Civil Contractor of the company. They have vast and proven track record in construction related services.
Ratings are dependent on the management's ability to successfully achieve its completion benchmarks and to improve its financial risk profile. The current rating signifies robust support of the company's sponsors and substantial progress towards the construction of complex, though the developing outlook depicts construction risk. Adding to that, ratings also take comfort from group association and strong sponsors profiles which includes Sugar Mill, Real Estate and Construction Businesses.

About the Entity
EAPL, a venture of Etihad Group, is private Limited company incorporated in 2021 under the companies Act 2017. Etihad group is one of the progressive industrial houses in Pakistan having different businesses like Sugar Mill, Construction Services and Real Estate. Mr. Zahid Jamil is the chairman of the board and also the CEO of the company. He has vast experience of heading multiple entities in different industries. Diversified skill set and experience of multiple years is reflected in the members’ profiles too and it will contribute strongly while establishing the presence of the company in the market.

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.