PACRA Assigns Initial rating to Ismail Industries Limited | PPSTS | PKR 4bln | Feb 24

Pakistan’s food products sector (divided into biscuits, snacks, confectionery and condiments segments, for the purpose of this report) exhibited a CAGR of ~6.0% over the past five years (FY18-22). During FY23, Sector’s market size, comprising the Biscuits & Cracker, Snacks/ Chips and Sugar Confectionery segments, was recorded at PKR~101bln in FY23, increasing by ~48.2% YoY. Condiments, a sub-category of food products, posted a revenue growth of ~8.0% YoY during the same year, recording at PKR~29bln. The increase in revenue across these segments is reflective of inflationary impact and consequent increase in food products prices (national CPI rose ~140.5% YoY during FY23). Meanwhile, the sector remains highly competitive with influx of new players, while marketing and distribution costs also remain high. The ratings reflect Ismail Industries Limited’s ('Ismail Industries' or ‘the Company’) diversified revenue stream generating from the well established brands Candyland, Bisconni, Snackcity, Ismail Nutrition, Ghiza Flour and Astro Films. The Company has promising profits in 2QFY24 due to its exports (2QFY24: PKR 28.9bln, 2QFY23: PKR 13.6bln). The prime reason of this increase in exports is due to the international projects of the Company. Total revenue of the Company increased and stood at PKR 60bln during 2QFY24 (2QFY23: PKR 41bln). Ismail Industries Limited have investments in its subsidiaries and associates. The company holds 78.53% shares of Hudson Pharma (Pvt) Limited. The Company also holds 75% of Ismail Resin (Pvt) Limited that deals with manufacturing of PET resin. The associates of Ismail Industries include Bank of Khyber, Plastiflex Films (Pvt) Limited and Innovita Nutrition (Pvt) Limited. Whereas, Introduction of a new product line named Giza Flour adds the value in the Company's profile. While being adequate leveraged, the Company has changed its borrowing mix and introduced a new PPSTS amounting PKR 4bln during Feb 24 which is fully subscribed by investors.
The ratings are dependent on continued revenue growth and maintenance of margins. Prudent management of expansion and investment-related debt in order to meet financial obligations is important. Stringent controls on the Company's debt levels remain imperative for sustaining the ratings. Brand reputation through customer satisfaction remains a crucial parameter for the rating.

About the Entity
Ismail Industries Limited, incorporated in 1988, is a public listed Company. The Company’s major business lines are confectionery, snacks, biscuits, nutritional food and plastic films.
Major shareholding of the Company lies with Ismail Family (~99%), through Mr. Muhammad Ismail (~16%), Ms. Almas Maqsood, wife of Mr. Maqsood Ismail, (~30%), Mr. Miftah Ismail (~31%), Mr. Ahmed Muhammad (~15%) and associates (~0.7%). Mr. Muhammad Ismail is the Chairman of the Board. The overall control of the Company vests with seven Board members. The CEO, Mr. Munsarim Saifullah, is supported by an experienced management team.

About the Instrument
The Company has successfully issued a rated, privately placed, unsecured Islamic commercial paper, Ismail Industries Limited | PPSTS | PKR 4bln during Feb 24. Tenor of the instrument will be 6 months. The purpose of the instrument is to meet Working capital requirements. The expected profit rate would be 6MK+50bps. The principal and profit will be made in bullet payment.