PACRA Upgrades Entity Ratings of Dawood Hercules Corporation Limited

Lahore, June 28, 2018 (PPI-OT):The ratings signify Dawood Hercules Corporation Limited’s (DH Corp) strong risk profile as an InvestCo. DH Corp is currently transforming its investment portfolio. The transformation process includes exit from the energy sector (Hub Power Company Limited), which has materialized into healthy gains, to penetrate telecommunication sector. DH Corp is acquiring 45% equity stake in Edotco Pakistan (Pvt.) Ltd. which is going to be a leading telecom tower operator. As a first it is acquiring 14,000 towers from Jazz, country’s’ leading telco. The technical expertise and remaining stake to this venture are coming from Axiata, Malaysia’s leading communication company.

The dividend flow from this is expected to start in the medium term. Meanwhile, DH Corp would have a steady, indeed increasing, dividend stream from Engro Corp. This cash-flow provides strong debt coverage. DH Corp’s debt is primarily in the form of Sukuks. Here a portion is used to fund the Edotco investment, while the remaining support treasury/capital market investments. The business acumen of the sponsoring family and strong governance practices provide support to the ratings.

The ratings require upholding current design of the overall risk profile. The targeted diversification in investment portfolio may not elicit rise in the risk exposure while adding income flow. At the same time, the managements commitment to maintain existing debt levels and coverages would be critical.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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