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The Pakistan Credit Rating Agency Limited

Date
29-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Muhammad Hassan
muhammad.hassan@pacra.com

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

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Hotels & Retail Industry (Mar 17) [View]
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PACRA Maintains Entity Ratings of Nishat Hotels and Properties Ltd
 Rating Type Entity
Current
(29-Dec-2017)
Previous
(23-Jun-2017)
 Action Maintain Maintain
 Long Term A- A-
 Short Term A2 A2
 Outlook Stable Stable
 Rating Watch - -

Nishat Group, through Nishat Hotels & Properties Limited, has set up project including Nishat Emporium, comprising a state of art shopping mall, a luxury hotel, and banquet halls. The ratings reflects the successful launch of the mall segment in FY17. Certain modifications and expansion in original design led to some completion delays in the banquet & hotel segment, which were eventually inaugurated in April17. Emporium, while primarily catering to the demand of from sprawling population in the neighbourhood, is also attracting footfall from other parts of the Lahore. With the mall segment being 100% occupied along with an increasing footfall, the major chunk of revenue is expected to emanate through lease rentals during FY18. As the brand name develops and occupancy rate increase, revenue from hotel and banquet segment will grow. The project is being funded with a mix of debt (60%) and equity (40%); the absolute amount of debt has increased. The company has recently procured short term loan from its associated company for meeting its working capital needs and to timely meet its financial obligations. However, the debt levels are projected to decline beginning FY19. Sustained flow of rentals from the mall segment along with incremental flow from banquet and hotel segment would provide support to the NHPL’s cashflows, in turn, its coverages.

Going forward, given sizeable leveraging, the financial risk profile of the company must be effectively managed. However, sponsor’s substantial equity position provides solace to the ratings. While the group has the advantage of managing hotel business, the company needs to develop & maintain requisite HR skill-set for managing such complex.
About the Entity
NHPL is a venture of Nishat Group - the country's leading business group having strong credentials of managing ventures in the textile, cement, energy, hospitality and financial sectors. NHPL is majority owned by Mansha family (90%), the sponsors of Nishat Group. The other shareholder is Allied Bank Limited (10%). NHPL's seven members board of directors comprises four representatives of the sponsoring family alongwith three executives from group companies. Mr. Hassan Mansha, the CEO, is leading power and hospitality ventures of the group.

Emporium mall - Biggest Mall of the country - sprawled across an area of 15 acres, comprises a twelve storey five star hotel with ~200 rooms, a shopping mall of 140 shops, a food court catering 30 international and local chains, a multiplex cinema of 9 screens, 6 banquet halls with a combined capacity of 5,000 people and a parking space of 2,000 cars. Mall was constructed with total cost of PKR 25.2bln.
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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