PACRA Assigns Initial Entity Rating of “AA-” to Mega Conglomerate of Habib Ullah Khan. Mega is associated with Mega & Forbes Group of Companies, an established group with presence in logistics, shipping, cement, real estate development, energy and food sectors.
Mega operates under a holding company structure. The Company has a sizeable holding in The Hub Power Company and stake in Haleeb Foods (through Mega Foods (Pvt.) Limited formerly called VMFG (Pvt.) Ltd.) and investment property (through Imperial Developers and Builders (Pvt.) Ltd.).
The rating indicates a Very low expectation of credit risk along with the very strong capacity for timely payment of financial commitments. As per PACRA, This capacity is not significantly vulnerable to foreseeable events.
Risks to the Company
The profitability of Mega Conglomerate remains under pressure due to Increased interest expense rising from Borrowings acquired for financing the investment portfolio. Mega has substantial Balance Sheet debt of Rs. 19.2 billion (62% Debt to Assets Ratio). The debt is fully backed by liquid investments and securities including HUBCO shares, TDRs, and TFCs.
Upcoming Sukuk Issue
Mega Conglomerate is in the process of borrowing funds via issuance of Short-Term Sukuk to alleviate liquidity pressure and subsequently replace the same with a long term Sukuk.
Mega, has consolidated asset strength of Rs. 65 billion with an equity base of Rs. 15 billion
at end June-18. Consolidated revenue and net profit stood at Rs.115 billion and Rs. 1.1 billion. Mega & Forbes Group had an equity base Rs. 54billion with total debt of Rs. 105 billion at Jun-18 end. Group’s total revenue is Rs. 116 billion with Net profit of Rs.14 billion.