ISLAMABAD: The Ministry of Finance has evaluated three major State-Owned Enterprises (SOEs), and declared that the Pakistan Agricultural Storage & Services Corporation (Passco) exhibits an elevated credit risk profile, reflecting structural challenges in its business and financial setup.
“The Passco debt structure poses a substantial risk, with high unmitigated exposure to all three market risks foreign currency, short-term, and variable-rate debt,” the ministry said. The solvency risk and debt structure of Passco are the most significant risks among all others, characterized by high debt-to-equity levels and marginal debt coverage.
The Debt Management Office (DMO) of the Ministry of Finance evaluated three major SOEs Government Holdings Private Limited (GHPL), National Transmission and Dispatch Company (NTDC) and Pakistan Agricultural Storage & Services Corporation Ltd (Passco). Out of the three, the Passco and the NTDC are the worst-performing entities in terms of different categories. The GHPL is classified as a low-risk entity, supported by a strong financial position and sound business profile.
The ministry has said the Passco was an SOE operating in the trading & marketing sector, specifically within the agricultural storage sub-sector. It exhibits an elevated credit risk profile with a stand-alone rating of 3.0, reflecting structural challenges in its business and financial setup. While operating within a partially supportive regulatory environment, the corporation faces constraints related to diversification and operational efficiency amid a competitive landscape. Financially, low profitability, tight liquidity and a high debt burden pose significant risks to financial viability. On the regulatory environment of Passco, the ministry says there has been an elevated risk, and its numerical score stood at 3 as regulatory independence remains limited, with tariffs not fully covering capital costs, necessitating subsidies. Emerging uncertainties around future regulatory support may affect revenue stability and long-term planning.
On Sector Risk and Competitive Position, the ranking scorecard stood at 2.6 with elevated risks, and the SOE operates in a competitive and cost-challenged environment, with limited diversification. While the industry growth is moderate, the entity remains exposed to economic, commodity and environmental fluctuations.
The Passco’s governance and management is categorized as elevated risks with a scorecard of 2.9, whereas the SOE faces governance challenges, with limited board independence and expertise, weak financial reporting and a high-risk management approach.
The profitability of Passco remains at a moderate risk due to a low EBITDA margin and declining return on assets, indicating limited efficiency in generating profit. The liquidity of this SOE remains at an elevated risk, as the current ratio has consistently been low around 1.1, suggesting potential challenges in meeting short-term obligations. The SOE’s track record in meeting financial obligations to the government is mixed, having a history of arrears and delays. The elevated risk rating is fundamentally driven by structural liquidity mismatches, elevated leverage ratios, and a pronounced dependence on recurrent fiscal transfers and embedded subsidies, which materially distort normalized earnings metrics such as EBITDA and key credit coverage ratios. These quasi-fiscal inflows, while temporarily enhancing reported financial resilience, do not reflect the entity’s endogenous operating strength. The current credit assessment integrates these fiscal inflows as implicit credit enhancements. However, under a no-support scenario or stress-adjusted framework, the entity’s standalone credit fundamentals including leverage, liquidity coverage and solvency indicators would be severely impaired, rendering the current risk profile materially weaker on an unadjusted basis.
The GHPL is an SOE operating in the oil & gas sector, specifically within the exploration & development sub-sector. The GHPL is classified as a low-risk entity, supported by a strong financial position and sound business profile. The qualitative factors contributing to this rating include a well-established regulatory framework, a stable industry with minimal competition, and effective governance with a qualified board and experienced management. On the quantitative side, the GHPL benefits from steady profitability, strong liquidity and a well-managed debt structure with minimal market risk exposure. With a weighted average numerical score of 1.4, the company demonstrates financial stability and resilience, reinforcing its ability to meet obligations and sustain long-term operations.
The NTDC is an SOE operating in the power sector, specifically within the transmission sub-sector. It is rated at an elevated risk, primarily due to rising debt pressures, weak governance and significant liquidity constraints. Qualitative factors contributing to this rating include regulatory limitations, cost inefficiencies and ineffective management, which further strain financial stability.
On the quantitative side, the NTDC faces high financial leverage, limited short-term liquidity and an unfavorable debt structure with a significant market risk exposure. With a weighted average numerical score of 2.8, the company’s financial flexibility remains constrained, requiring urgent improvements in governance, debt management and operational efficiency to mitigate long-term risks.