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The Pakistan Credit Rating Agency Limited

Date
29-Jan-2018
Analyst
Silwat Malik
silwat.malik@pacra.com

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

  • Methodology | Debt Instruments Rating Methodology (Jun 17) [View]
  • Methodology | Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Criteria Modifiers (Jun 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-11 of Jahangir Siddiqui & Co. Limited
 Rating Type Debt Instrument
Current
(29-Jan-2018)
 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. JSCL has built a non-strategic book of investments having a market value of over PKR3bln at end Sep-17. The company intends to penetrate in energy, petroleum and infrastructure segments. JSCL's financial profile is supported by its strategic investments in financial sector - Banking and Insurance. The company benefits from ensuing dividend stream, which is expected to increase with improving underlying entities. Oversight framework for the strategic investments is improving. JSCL has a low leveraged capital structure.

JSCL intends to fund it's new core investments through a combination of debt and internal sources given gestation period of most initiatives, these are primarily finance through long term debt instruments. JSCL has an established track record for issuance of debt instruments. Currently it has three outstanding instruments, while it is planning to issue another shortly. Given its regular income flow, interest and principal coverages remain good.

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. 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 seven members BoD (including the CEO). The board includes one JS family member 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 plans to issue its 11th TFC worth of PKR 1,500mln with a tenor of 5 years including a grace period of two years. This will be OTC Listed instrument. The redemption of the TFCs will be in six (6) equal semi-annual installments commencing from the 30th month after the Issue date. The issue has Floating rate of return at 6Months KIBOR + 1.40% p.a. Profit is payable semi-annually in arrears. The instrument is secured by pledge of securities in a designated account with the Central Depository Company of Pakistan Limited, with a 35% margin. Early redemption, partial or full, will be allowed with a 30 day prior written notice at a premium of 0.25% of the amount being prepaid. Proceeds from the issue will be used to fund business expansion envisaged by JSCL.
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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