PACRA Upgrades Entity Ratings of Packages Limited

Packages Ltd. (‘Packages’ or ‘the Company’), a flagship holding company of Ali Group, has built a healthy profile over years. The Company was initially strategized as an operational holding company. However, in 2020, through a strategy revamp, the Company was structured as a pure holding company. All the operational segments were placed on the balance sheet of a wholly owned subsidiary, Packages Convertors. Today, Packages holds a sizable investment book of ~ PKR 51bln (as of Dec-22), comprising core and strategic investments of quoted and unquoted entities. Packages Convertors holds a prominent market presence in flexible packaging, folding cartons, and consumer products (tissues). The subsidiary is expected to post a growth trajectory and remain a cash generating investment. Moreover, Bulleh Shah Packaging, an emerging investment previously, now shares substantial dividends. The real estate venture, Packages Mall, and the international JV, OmyaPack, have also emerged. However, the newly formed subsidiary, StarchPack, is in its initial gestation phase. In CY22, the Company took many strategic initiatives. Firstly, the Company acquired ~19.3% stake in Tripack Films from Mitsubishi Corporation, increasing the entire holding to ~69.3%. Secondly, Packages invested in Systems Ltd. and Sanofi-Aventis Pakistan Ltd. However, lately, the Company has acquired a significant stake in Sanofi-Aventis through a consortium led by Packages. Thirdly, a new subsidiary, named Packages Trading FZCO, was incorporated in Dubai Economic Zone.
The Company's topline remains healthy, supported by an overall growth of ~16% in dividend income and rental income. Bulleh Shah Packaging, Packaging Convertors, and Nestle continued to share a major chunk of dividend income. While rental income emanates mainly from Packages Convertors. Subsequently, the Company's profits remain sizable and are expected to remain stable as the envisaged dividends from core and strategic investments are being realized. In the current inflationary pressure and high interest rate environment, Packages and its investments are expected to be marginally impacted. However, the management is confident to hold its market presence along with improved performance, going forward. The financial profile is characterized by low leveraging and a strong consolidated position, providing comfort to the Company's ratings. Strong executional track and business acumen of Sponsors further adds a shield.
The ratings are dependent upon building a consistent and augmenting dividend stream from maturing and emerging investments, respectively. Moreover, management's ability to execute its envisaged strategy of growth and expansion amidst the prevailing economic challenges remains imperative for the ratings.

About the Entity
Packages Ltd., a listed concern, was established to convert paper and paperboard into consumer packaging in 1957. The Company is classified as an investment holding company and has continued to enhance its investment book to meet the growing demand in the FMCG sector. Ali Group holds ~46.5% shares of the Company through Directors, individual family members, and its corporates; with IGI Investments (Pvt.) Ltd. owning the prime share. The Company has a free float of ~23%. Mr. Syed Babar Ali provides guidance, while Mr. Syed Hyder Ali heads the Company as its CEO/MD. They are supported by a team of experienced professionals.