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The Pakistan Credit Rating Agency Limited

Date
18-Jul-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Mohsin Naseer
mohsin.naseer@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Debt Instruments Rating Methodology (Jun 17) [View]
  • Corporate Rating Methodology (Jul 17) [View]
  • Methodology | Holding Companies (Jun 17) [View]

Related Research

  • Sector Study | Holding Company (Jun 17) [View]
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PACRA Assigns Preliminary Rating to proposed TFC-X of Jahangir Siddiqui & Co. Limited
 Rating Type TFC-X
Current
(18-Jul-2017)
 Action Preliminary
 Long Term AA+
 Short Term -
 Outlook Stable
 Rating Watch -

The ratings reflect JSCL's strong risk absorption capacity emanating from a sizeable investment portfolio mainly financed through equity. These are pre-dominantly strategic in nature; notably most are listed with adequate liquidity. During the year, the company penetrated further into financial & technological sector through equity injection. The Company has also build a non strategic book of investments having a market value of over PKR 4 bln along with sizeable cash placements. This include a sizeable investment in technology sector along with other investments. JSCL's financial profile continues to benefit from the ensuing dividend stream, though currently low, which is expected to increase with improving underlying entities. JSCL's financial profile includes its profitable strategic investments in financial sector - JS Bank and EFU Insurance, providing strong position in ensuing consistent dividend stream. The oversight framework for the strategic investments is improving. JSCL has a low leveraged capital structure. JSCL plans to issue a debt instrument (10th TFC) of PKR 1,500 mln. The proceeds will be utilized for expansion of business and other on going projects. The rating of the instrument draws comfort from the security structure.

The ratings are dependent on the company's ability to augment cash producers in its investment book. The improvement in the performance of the company's strategic investments provides comfort. Diversification of the investment book among sectors would be beneficial. Immaculate financial discipline remains important for the ratings.
About the Entity
JSCL, listed on PSX and established in 1991, is the holding company for Jahangir Siddiqui (JS) group's businesses .The majority shareholding (43%) in JSCL is held by Mr. Jahangir Siddiqui, followed by SAJ Capital (6%). JSCL's overall control vests in its eight members BoD (including the CEO). The board includes two JS family members along with five other group nominees (including CEO), and one independent director. The CEO, Mr. Suleman Lalani, FCA, carries extensive experience in financial industry. He has been associated with JS Group since 1992.

About the Instrument
JSCL to date, has issued nine TFCs out of these seven have been fully redeemed in a timely manner. The management has exercised call option to redeem 7th TFC during Apr-16. To fund its future business expansions, JSCL plans to issue 10th privately placed TFC of PKR 1,500 for a tenor of 5 years. The issue will have semi-annual coupon payments (6 months KIBOR + 1.40% p.a) after 6 months from the issue date. Moreover, redemption of the TFCs will be in eight equal semi-annual installments commencing from the 18th month after issue date. The issue has been secured by pledge of listed securities with margin of 35% which includes but not limited to; EFU Life Assurance Limited, EFU General Insurance Limited, Ghani Glass Limited and Pakistan International Bulk Terminal Limited.
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.
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