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The Pakistan Credit Rating Agency Limited

Date
31-Dec-2016
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Aman Zafar
aman.zafar@pacra.com

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

  • Security Agency Grading Methodology (Jun 16) [View]

Related Research

  • Sector Study | Security Services (Dec 16) [View]
Disclaimer
This press release is being
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PACRA Maintain Entity Ratings of Wackenhut Pakistan (Pvt.) Limited
 Rating Type Entity
Current
(31-Dec-2016)
Previous
(31-Dec-2015)
 Action Maintain Maintain
 Long Term BBB BBB
 Short Term A3 A3
 Outlook Stable Stable
 Rating Watch - -

The group streamlined its business strategy with WPPL specializing in Cash in Transit (CIT) business, while its man guarding services parked in Security & Management Services (SMS), another group company. The intended outcome is to focus on core high margin CIT segment and enhance its system share. The ratings reflect the company's robust industry positioning and its business model that garner strength from the Pathfinder Group's vision of offering a comprehensive set of security solutions through its dedicated companies. Hereby, the group distinguished itself by offering relatively better services through skilled human resource. The high fixed cost related to the man guarding segment subdued the improvement in the margins of CIT segment reducing the company’s profitability. Pressure on company’s financial profile remains; owing to sizeable cash requirements of new group ventures funded by WPPL’s bank borrowings and payables. The management expects to achieve operational break even in most of the new ventures in the medium term.

The ratings of the company are dependent upon its ability to add incremental profitability by focusing on high margin CIT business. Acquisition of further debt without adequate support from cash flows, compromising debt servicing capacity, would negatively impact.
About the Entity
WPPL, incorporated in Pakistan in 1992, is engaged in CIT business. The company employs 1,008 guards and has a fleet size of 240 armored vehicles. The ownership of the company remains with Mr. Ikram Sehgal, who is the Chairman and CEO of the company, and his family. His extensive experience in security industry has been a cornerstone for WPPL, complemented by an experienced senior management team. Mr. Muhammad Abaad Elias, COO of WPPL, carries significant expertise in CIT business.


The inclusion of Mr. Zarrar Sehgal (Deputy Chairman), Ms. Kashmala Sehgal, Ms. Haya Sehgal and Ms. Nefer Sehgal has increased the board size to seven members. It is a family dominated board, comprising six members of sponsoring family. In order to benefit from a diverse perspective, the induction of independent directors on the board becomes important.
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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