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The Pakistan Credit Rating Agency Limited

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

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

  • Methodology | Corporate Rating Methodology (Jul 17)
  • Methodology | Correlation between long-term and short-term rating scale (Jun 17)
  • Methodology | Criteria Modifiers (Jun 17)
  • Methodology | Holding Companies (Jun 17)

Related Research

  • Sector Study | Holding Company (Jun 17)
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PACRA Maintains Ratings of Jahangir Siddiqui & Co. Limited
 Rating Type Entity TFC-VIII TFC-IX TFC-X
Current
(29-Jan-2018)
Previous
(20-Jun-2017)
Current
(29-Jan-2018)
Previous
(20-Jun-2017)
Current
(29-Jan-2018)
Previous
(20-Jun-2017)
Current
(29-Jan-2018)
Previous
(18-Jul-2017)
 Action Maintain Maintain Maintain Maintain Maintain Maintain Maintain Preliminary
 Long Term AA AA AA+ AA+ AA+ AA+ AA+ AA+
 Short Term A1+ A1+  -  -  -
 Outlook Stable Stable Stable Stable Stable Stable Stable 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
TFC 8 - Listed instruments of PKR750mln issued during Apr-14 secured against marketable securities. Markup is paid semi-annually at a floating rate of 6MK + 1.75% p.a. The TFC has an outstanding balance of PKR356mln at year end Dec-17 and would fully mature in Apr-19.
TFC 9 – Privately placed instruments of PKR1,000mln issued during Jun-16 secured against marketable securities. Markup is paid semi-annually at a floating rate of 6MK + 1.65% p.a. Repayment started in Dec-17 and has an outstanding balance of PKR 875mln. The TFC will fully mature in Jun-21.
TFC 10 - Privately placed instruments of PKR1,500mln issued during Jul-17 secured against a lien over designated account with CDC containing marketable securities. Markup is paid semi-annually at a floating rate of 6MK + 1.40% p.a. Repayment would start in Jan-19 and will fully mature in Jul-22
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.