PACRA maintains entity ratings of Welcon Chemicals (Pvt.) Limited

Welcon Chemicals (Pvt) Limited (“Welcon” or “the Company”) operates as a dynamic player in the pesticide industry specializing in a comprehensive range of Agrochemical products. The Company's prudent decision-making framework, coupled with its robust revenue performance, is evident in its ratings. Further, operational synergies have resulted in higher margins and enhanced profitability. Welcon strategically diversifies its revenue streams across Pesticides, Plant Growth Regulators, Bio Fertilizers, and Seeds to efficiently tap the market, with Pesticides leading as the major revenue generator. Sustaining a healthy top line, the Company introduced new products to the market. While the raw materials for pesticides are essentially procured predominantly from China and Europe while raw material for fertilizers is procured locally. The Company boasts a robust dealer network, with over 1000 dealers strategically located throughout the country. Moreover, instead of relying heavily on imported products, the Company expanded its product portfolio by incorporating locally produced biofertilizers that are a cost-effective and efficient substitute for urea and DAP-based fertilizers. During FY23, the pesticide sector in Pakistan faced substantial challenges, marked by catastrophic events i.e., heavy rainfall and floods. Resultantly, the agri-chain incurred considerable losses, particularly affecting the major crops. To effectively mitigate risks the Company employs a streamlined procurement approach and reinforces its business presence in the Punjab region. Sustaining a healthy top line, the Company introduced new products to the market. Margins and in turn profits remain intact. However, fluctuations in raw material prices owing to PKR depreciation and the fragmented & competitive nature of the pesticide industry embed challenges. In terms of financial risk profile, the Company relies significantly on short-term borrowings to manage its working capital requirements, resulting in elevated finance costs that impacted Welcon's coverages. However, the current coverages serve as a protective measure, assisting when required. Further, the ratings continue to derive strength from the long‐standing experience of the sponsors established a track record for operations and a strong competitive position.
The ratings assigned to Welcon take into account a moderate business risk profile; the sponsor strength emanates from Allahdin Group’s vast and prolonged business interests in fertilizers, pesticides and other commodities. Going forward, ratings remain sensitive to the achievement of projected revenues, maintenance of debt servicing ability, and enhancement in coverages.

About the Entity
Welcon Chemicals ("Welcon" or "the Company"), incorporated in 1993, stands as a pioneering entity within the Allahdin Group, offering a variety of agri-based productions ranging from urea and DAP based fertilizers, to pesticides and seed varieties. The Company’s plant is located at Multan. The Company is majorly owned by Mr. Zain Iftikhar (~68%) Ch. Zia ur Rehman (~15%), Ch. Iftekhar Niaz (~13%), Mr. Masood ur Rehman (~2%), and Ms. Ghazala Ghazni (~2%) (w/o Ch. Iftekhar Niaz– Group Chairman). Mr. Zain Iftekhar, the BoD's Chairman and the CEO of the Company, and he is assisted by a team of professionals.