PACRA Maintains the Entity Ratings of Avanceon Limited

Avanceon Limited ("AVN" or "the Company") is a prominent player in the industrial automation industry. Since commencing operations as a computer reseller, AVN has evolved into a premier turnkey automation and control solutions provider underpinned by strong business fundamentals, sustained innovation, and a clear strategic vision. The Company's ownership profile reflects its dual role as both a holding and operating entity, supported by two wholly owned subsidiaries, alongside a well-established regional branch network. This transformation has reinforced AVN's market position across Pakistan and the Middle East, particularly in Qatar, UAE, and KSA. Building on its regional presence, the Company is also pursuing expansion into Australia through a wholly owned subsidiary, targeting another high-potential market.
AVN operates through a hybrid project management model that integrates waterfall and agile methodologies, enabling efficient execution of complex automation projects. The Company enjoys competitive advantage through strategic collaborations with renowned OEMs, facilitating the delivery of customized, technology-driven solutions to its customers. However, the recurring revenue stream is supported through Octopus Digital Limited, which provides KPI-driven digitalization solutions under the AMS segment, enabling clients to optimize manufacturing, supply chain, and financial operations through real-time performance monitoring dashboards. Despite prevailing geopolitical uncertainties, the Company sustained its growth momentum during 1QCY26, with consolidated topline increasing by 49% to PKR 3.7bln (1QCY25: PKR 2.5bln). UAE remained the largest contributor to revenue, followed by KSA, Qatar, and Pakistan. The growth primarily stemmed from the timing of revenue recognition on projects executed within the Middle Eastern operations. While gross margins remained largely stable, net profitability was moderated by elevated operating expenses and a higher tax burden. In cognizance of this, the management strategically strengthened the governance, operational discipline, and risk mitigation practices to support sustainable long-term growth. Lately, the Company has secured projects worth approximately USD 11.6mln, comprising USD 6.3mln in critical infrastructure projects (UAE), USD 3.5mln in energy sector projects (Qatar), and USD 1.4mln in utility modernization projects (KSA). In Pakistan, the Company posted a notable growth from fuel automation business by serving the leading OMCs, thereby expanding its market share.
Strategically, AVN continues to advance its USD 100mln PO Generation initiative. During the review period, the Company has completed Saudi Aramco's vendor qualification and cybersecurity compliance requirements and entered into a strategic collaboration with Zamil O&M to pursue opportunities with Saudi Aramco, SEC, Marafiq, and the Royal Commission for Jubail and Yanbu (RCJY). Management remains focused on expanding its presence across the Middle East, supported by a diversified project pipeline comprising multiple segments; Digital Factory Solutions & PRD, Avanceon Fuelling Solutions, Systems, Building Technologies, and Business Development. The Company's financial risk profile remains supported by adequate credit quality metrics and healthy operating cash generation. However, the sizeable balance of intercompany trade receivables continues to constrain the balance sheet. As per the management, these receivables are expected to be converted into equity.
The ratings are contingent upon the Company’s ability to sustain its growth trajectory in international markets while ensuring prudent management of associated risks. Volatility in trade receivables remains a key area of consideration. Financial discipline is considered core to the ratings, with enduring emphasis on maintaining sound credit quality metrics.

About the Entity
The Company's major shareholding of ~70.04% rests with the individuals, Mr. Bakhtiar Hameed Wain (~59.07%), Mr. Amir Wain (~10.40%), and Mr. Tanveer Karamat (~0.57%). The remaining stake of ~29.96% is vested with free float in public/institutions and others.