PACRA Maintains Entity Ratings for Entertainment Pakistan Limited Amid Real Estate Developments

Islamabad, The Pakistan Credit Rating Agency (PACRA) has sustained the entity ratings for Entertainment Pakistan Limited (EPL), acknowledging its dual income streams from property rentals and sales, despite facing challenges such as legal hurdles and market downturns.

According to The Pakistan Credit Rating Agency Limited, EPL leverages a business model that includes earning sublease income from buildings leased from the Defence Housing Authority (DHA) and developing its own real estate projects where ownership and possession of apartments are transferred upon complete installment payments. The company’s inaugural venture, "Dawood Homes," is nearly complete with 96% of the project finished and 95% of the units sold. However, EPL's follow-up project, "Roshan Homes," has encountered delays due to legal complexities, although it has received PKR 27.5 million from REALL Limited UK as part of a soft debt arrangement.

Despite a slight increase in top-line revenue to PKR 97 million in FY23 from PKR 92 million in FY22, EPL has faced volumetric sales challenges amid depressed market conditions. Nevertheless, the company benefits from a healthy gross profit margin of 33.3%, attributed to strategic price adjustments.

EPL has managed to keep financial risks minimal by avoiding significant bank borrowings, preferring instead to secure funds from sponsors and their close associates. This approach, coupled with a batch-based construction and delivery system, allows EPL flexibility in pricing and helps mitigate completion and inflation risks.

PACRA emphasized the importance of EPL addressing its governance and financial discipline to enhance corporate structure. The completion of the first building in the Roshan Homes project and the progress on two additional projects in developed societies are critical for the company's future success. Maintaining land ownership integrity and financial strength remains pivotal for EPL's ongoing operations and growth.