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Syed Nawazish Mehdi Zaidi

Adeel Rana
Asad Omer Khan
Muhammad Ali Shah
Shawn Gill

•GDP growth of c.5% annually until 2019E

• 6th largest country by population

• Agricultural sector contributes c.24% of

•Country’s FX reserves have recently

reached a record high of US$20bn+ in


•Stable economy with decreasing

interest rates and a stable currency

•IMF extended loan facility of US$6.6bn in 2013

with disbursement spread over 3 years with

US$5.6bn already disbursed

•IMF has recognized that “Economic activity

has continued to gradually gain strength, and

short‐term vulnerabilities have receded”

•China‐Pakistan Economic Corridor

(“CPEC”) has been labeled as a “game

changer” for Pakistan

•CPEC involves development of US$46bn

of projects in infrastructure and power

sectors China
Engro Corp. Overview
 Engro Corporation Limited (“Engro Corp” or “ECorp”) is
one of Pakistan's largest conglomerates. It seeks to be the
premier Pakistani enterprise with a global reach
passionately pursuing value creation for all stakeholders.
 ECorp has over 50 years of experience of operating in
Pakistan, a demonstrated in‐house capability of project
execution and strong working relationships with leading
international technology, construction and financial
 ECorp’s major shareholder is the Dawood Group, with
other shareholders including the general public and
reputed local and foreign institutions.
 Engro Corp has a market capitalization of PKR 161.0bn
(US$ 1.5bn)*.
Fertilizer Business:
 One of the 50 largest fertilizer manufacturers of the
world close to 5 decades of operations as a world class
 Contributes around 1.8 million tons of urea to the
local agricultural economy annually
 Involved in trading of phosphate fertilizers
Trading & Processing:
 Global sourcing and largest importer into Pakistan of
phosphatic fertilizers
 Owns the largest state‐of‐the‐art rice processing mill
in the country
 Involved in trading of micro‐nutrients and processing
of agri-products, rice and other commodities
Energy Business:
 Set up the first permeate gas based power plant & LNG
terminal in Pakistan
 Venturing into coal‐based mining & energy
Petro-Chemicals Business:
 Only fully integrated chlor‐vinyl chemical complex in
 Producing poly‐vinyl chloride, caustic soda, Sodium
hypochlorite and other chlorine byproducts
Food Business:
 Market leader in UHT Pakistan's no. 2 Ice Cream
brand in
 less than 2 years since inception
Chemical storage & handling:
 Only state of the art integrated bulk liquid chemical &
LPG Terminal in Pakistan
 Handling 2/3 of all liquid chemicals imported into
Engro Corp. Growth Strategy:
 Engro Corp has historically raised significant capital
(debt and equity) to finance growth in the fertilizer &
agri‐inputs, energy & related infrastructure and
consumer verticals
 While achieving success Engro has also gained trust of
reputable international partners – IFC,ADB, VOPAK,
DEG, Mitsubishi & GE
Capital Requirement:
 As part of its strategic initiatives to enable the
Company to diversify its portfolio and meet its capital
allocation requirements, the Company plans a further
pruning of Engro Fertilizers
 The Company has appointed advisors for the potential
sale, subject to market conditions, of up to 24% of
the shares of Engro Fertilizers Limited by way of a
private offering to local and international investors
Future Initiative:
 Engro Corp has expanded its energy vertical through
investments in LNG Terminal, Thar coal mining &
power generation.
Engro Polymer Timeline:
 The company’s history dates back to 1994 when it was
established as a joint venture with two Japanese companies.
Later, perturbed with low margins, it decided to change the
business model by producing PVC raw material in Pakistan
and made an investment of $350 million.
 With 195,000 tons of installed capacity, the company meets
80% of the PVC demand in the country, while the rest is
met through imports. In the imported material, 10-12%
comprises hazardous scrap of PVC.
 PVC is mainly used in manufacturing PVC pipes. Other
sectors include artificial leather, shoes, rigid and soft
sheets, garden hose, windows and doors, etc.
 After passing through three tough years, the company
finally reported a net profit of Rs50 million in 2012,
followed by earnings of Rs717 million in 2013.
 The management had hoped that 2014 would also be a
better year, but the company posted a loss of Rs1
billion and Rs649 million in 2014 and
2015, respectively.
 The company however has posted a massive net profit of Rs. 900
Million in Year 2016.

 EPCL’s revenue during the 6 months of 2017 grew to Rs. 7.3

billion compared to Rs. 5.44 billion in the same period last year.

 EPCL’s revenue during the nine-months of 2017 grew to Rs. 20

billion compared to Rs. 16 billion in the same period last year,
attributed to higher PVC resin demand due to overall economic
growth in the country. The company maintained its focus on
operational excellence and achieved the highest ever PVC & VCM
production for any quarter and for nine months.
Key Business Risks and Mitigant
 Gas Availability
 Depressed International Urea Prices
 Local Urea Oversupply situation
 GIDC on concessionary Gas
New Daharki Plant:
 Total Investment = 10.3bn
 5.4 bn through right shares
 2.2 bn through debt
 2.7bn through will be done through internally
generated cash flows
 Capacity = 195,000MT
 After the project = 295,000MT

 Before the project : 24bn revenue, 2.1bn Net Profit

 After the Project : 37bn revenue, 3.6bn Net Profit

Prices of PVC changed from 837USD per ton to

907USD per ton due to ban on Mercury based Plants.
Affects of this Project on Engro Polymer:
Revenues will increase
Capacity increase
Stock Price and EPS will increase
 NPV = C x {(1 - (1 + R)-T) / R} − Initial Investment
 With a discount rate of 5.75% and a span of 7 years, your
projected cash flows are worth $11,172,080,286.83 today,
which is greater than the initial $1,000,000,000.00 paid.
The resulting positive NPV of the above project is
$10,172,080,286.83, which indicates that pursuing the above
project may be optimal.

 Remember that even though a project offers a positive NPV,

the projected cash flows are still estimations. The accuracy
of these projected figures depends on the skill and
experience of the analyst, and likelihood of these cash
flows materializing depends on the financial risk
associated with the type of project being pursued.
 6.235%
Internal Rate of Return
Sensitivity Analysis
 A sensitivity analysis is a technique used to
determine how different values of an independent
variable impact a particular dependent variable under
a given set of assumptions
Sensitivity analysis:
Initial Investment 10.3bn
Change in Demand Annual cashflows
Pessimistic 1.2
Most likely 1.5
Optimistic 1.8
Sensitivity analysis:
Change in discount rate
Pessimistic 6.5
Most likely 5.75
Optimistic 4
Scenario analysis:
 Scenario analysis is a process of analyzing possible
future events by considering alternative possible
outcomes (sometimes called "alternative worlds").
Thus, scenario analysis, which is one of the main
forms of projection, does not try to show one exact
picture of the future.
Scenario Analysis:
 Govt. lifts ban on Mercury based plants.
 Increase exports of PVC
 Govt. give subsidy in agricultural products
 Demand increase
 Increase in interest rate/Kibor