PACRA maintains Entity Ratings of Entertainment Pakistan Limited

Entertainment Pakistan Limited (EPL or the Company) enjoys two streams of income – Rental and through sale of developed properties. The company earns sublease income by subletting buildings that have been taken on Lease from DHA under first pivot, and develops its own real estate projects under second pivot. In the developmental model, EPL transfers ownership as well as possession of apartments after installments are received completely. The company purchases land on deferred payment model for its projects and starts construction before transfer of land ownership which creates risk of land ownership disputes. Company’s first real estate venture, “Dawood Homes” offering accommodations on 5 marla plots, is 96% complete with only one building remaining to be delivered. Whereas, the Dawood Homes project is 95% sold. Payment for Dawood Homes land has been made fully while payment for its second venture, Roshan Homes land was to be adjusted against proceeds received from sales of Roshan Homes. Company has also received a tranche from REALL Limited UK, 50% of total debt to be received, for Roshan Homes amounting to PKR 27.5 million which is a soft debt at 6%, repayable in PKR. However, the project has been delayed due to certain legal formalities. The company’s topline has increased slightly but, suffered volumetrically owing to depressed market conditions and was recorded at PKR 97mln in FY23 (FY22: PKR 92mln) with 33.3% GP margin on the back of increase in price. EPL is not exposed to any significant financial risk as it does not have significant borrowings from banks. It instead borrows from sponsors and their close relatives. Completion risk and inflation risk of the company is low as units are constructed and handed over on batch basis which gives it flexibility over price setting. The company is committed to complete first building of Roshan Homes soon and has 2 more projects in the pipeline on similar model in already developed societies.
Ownership of land and adequacy of financial strength remain crucial for the company. Timely completion of the projects along with delivering promised quality to develop positive brand image and timely collection from customers against sale of apartments are important. Governance and corporate structure require improvement and so does financial discipline.

About the Entity
Entertainment Pakistan Limited is a public unlisted company incorporated in 2011, with shares almost equally divided among group of highly qualified and experienced individuals. The BoD consists of sponsors as well as 2 independent directors.