Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained the entity ratings of Zahir Khan and Brothers (ZKB), a prominent contractor in Pakistan known for executing large-scale infrastructure projects. The ratings reflect ZKB's established business profile and its extensive experience working with international donor agencies, which provide significant funding for its projects. Despite a marked increase in revenue, the firm's profitability has not grown proportionately, and its business model remains capital-intensive.
According to PACRA, ZKB's revenue rose significantly to PKR 37,570 million in FY25 from PKR 20,851 million in FY24, indicating an expanding project portfolio. However, the firm's profitability, including a revaluation gain, stood at PKR 4,803 million. The firm continues to rely on non-funded bank lines and supplier credit for its funding needs, although it has recently begun using short-term borrowings to support liquidity. With an expanding order book, non-funded exposure is expected to increase further.
The firm is exploring debt market options to diversify its funding sources, which could introduce additional leverage-related considerations. ZKB is actively pursuing geographical diversification and has a steady pipeline of bids for new projects to support revenue growth. However, its ability to execute newly awarded projects remains a key sensitivity, as delays or weaker execution could impact cash flows.
Management has initiated steps toward corporatization, including the establishment of ZKB Construction (Private) Limited. While these developments indicate a positive direction, PACRA notes that governance and corporate structure could benefit from further strengthening to align with best practices. Financial metrics are also highlighted as an area requiring attention to maintain the firm's financial health.
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