Karachi, January 14, 2021 (PPI-OT): VIS Credit Rating Company Limited has assigned initial entity ratings of A-/A-2 (Single A Minus/Single A Two) to Engro Enfrashare (Private) Limited. Outlook on the assigned ratings is ‘Stable’. The assigned ratings reflect Engro Enfrashare’s low business risk, modest financial risk profile and strong sponsor support. Enfrashare is a wholly owned subsidiary of Engro Infiniti (Private) Limited.
The ultimate parent company is Engro Corporation Limited which is a subsidiary of Dawood Hercules Corporation Limited (DH Corp). Enfrashare has a tower portfolio of over a 1,250 towers which is geographically distributed into three regions: North (20%), Central (50%), and South (30%). The Company operates under two models, acquisition of existing towers and Built-To-Suit (BTS). Major chunk of the towers are constructed under the BTS model, while others are acquired. The Company plans to aggressively grow its tower portfolio to around 5,000 towers by 2025.
The assigned ratings incorporate Enfrashare’s low business risk and its position as a growing independent TowerCo. The overall business risk profile of the company is considered low given the rising demand of towers due growing 3G/4G usage and sizeable potential for coverage and capacity expansion. Moreover, introduction of 5G in Pakistan will significantly increase the demand for towers in the country over the long-term given that towers are required over shorter distances for 5G roll out.
Furthermore, Enfrashare benefits from high customer loyalty given extensive lock-in periods, limited scope for termination, and an escalation clause which is part of the Service Agreement. The mentioned factors are expected to improve the tenancy ratio through increase in tenants on existing and new towers which remains a key rating driver.
Assessment of financial risk profile incorporates secured cash flows from all major telecom operators in Pakistan. Capitalization levels are expected to be strengthened through conversion of current loan from sponsors and injection of additional equity. However, ratings are constrained by stretched cash flows with sizeable capital expenditure plans and limited cushion in debt servicing. Continued sponsor support is required to achieve the planned growth. Strong explicit sponsor support over the rating horizon is a key rating driver.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/
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