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The Pakistan Credit Rating Agency Limited

Date
12-Jan-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Mohsin Naseer
mohsin.naseer@pacra.com

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

  • Holding Company Methodology (Jun 16) [View]
  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]
  • Preference Shares Rating Methodology (Jun 16) [View]

Related Research

  • Sector Study | Holding Companies (May 16) [View]
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PACRA Maintain Entity Ratings of Dawood Hercules Corporation Limited
 Rating Type Entity
Current
(12-Jan-2017)
Previous
(12-Jan-2016)
 Action Maintain Upgrade
 Long Term AA- AA-
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings signify holding company stature of DH Corp. DH Corp's financial profile continues to benefit from the ensuing dividend stream, which is expected to increase with improving performance of the underlying portfolio – core & strategic investments. The focus is towards identified sectors, especially energy, with clarity that DH Corp would expand through associates/partnerships primarily. The ratings reflect continuous augmenting of the monitoring mechanism thereby providing strategic guidance to the investee companies. The oversight of investments is done through a structured process, an important pillar of which is the analytical team in DH Corp with presence of nominee directors on the boards of investee companies. The business acumen of the sponsoring family and strong governance practices provide support to the ratings.

The ratings are dependent upon the group's overall risk profile. The targeted growth may not elicit rise in the risk exposure. At the same time, the group's financial metrics must remain strong.
About the Entity
Dawood Hercules Corporation Limited (DH Corp) came into being on January 2011, as a result of spin-off of its fertilizer operations. The holding company primarily manages investments in its subsidiary and associates. The company holds 37.22% ownership in Engro Corporation - a holding company with the business portfolio across various sectors with the market value of PKR 61.6bln as at Dec-16. DH Corp also holds 14.91% ownership in Hub Power Company Limited (HUBCO) - an Independent Power Producer with 3 Power Plants generating up to 1500 MW. HUBCO market value stood at PKR 23.1bln as at Dec-16

The company's eleven member Board of Directors includes four representatives of Dawood family. The remaining six members are non-executive and independent directors. Mr. Hussain Dawood, the patriarch of Dawood family, serves as the chairman of the board. Mr Samad Dawood left charge as a CEO of the company from 1st December 2016. Mr. Inam-ur-Rahman succeeded him as a deemed director by the virtue of his position as CEO. Before joining DH Corp, Mr. Inam-ur-Rahman held the position of CEO at Dawood Lawrencepur Limited, Reon Limited and Tenaga Generasi Limited. Mr. Inam holds a graduate degree in Electrical Engineering from UET and an MBA from Lahore University of Management Sciences. Mr. Samad Dawood continues to be a board member to oversee company affairs as a sponsor figure.
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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