PACRA Maintains the Entity Ratings of Martin Dow Limited

Martin Dow Limited (herein referred to as "MDL" or the "Company"), is an operating and holding company of the Martin Dow group which is one of the leading pharmaceutical groups in Pakistan. The sponsoring family has been in the pharma business for over 6 decades. As of present, four companies operate within the group (MDG) which include; (i) Martin Dow Limited (ii) Martin Dow Marker Limited (iii) Martin Dow Specialties (Private) Limited & (iv) Seatle (Private) Limited. Martin Dow has developed a diversified portfolio comprising chronic and acute therapeutic segments. The business growth is driven through strategic acquisitions and organic portfolio growth. MDL had also been known for its high-end acquisitions signified by the acquisition of multiple products and industrial assets of ROCHE and MERCK in 2010 and 2016 respectively. The group manufactures and sells multiple well-known brands under its portfolio, including Concor, Evion, Synflex, Lexotanil, Toradol, Librax, and Rocephin. The group is well poised in the industry with a group size of PKR ~36bln as of Dec 23. The rating takes comfort from the company’s association and strategic alliances with renowned multinational groups such as Roche, Merck, Sanofi & Boehringer Ingelheim. From time to time the Company has invested in modernizing and integrating new technologies into its manufacturing facilities. The board of MDL comprises experienced and professional experts. The Board size is considered adequate as the management is mindful of the corporate governance requirements and fulfills the applicable statutory criteria. During FY24, the pharmaceutical sector grew by ~22% YoY and registered a revenue of ~PKR 918bln where the top 10 players have a market share of ~49%, as per the IQVIA Report. Approval of price adjustments by DRAP and PKR stabilization during the latter half of CY23 proved beneficial for the industry as it relies on imported APIs to fulfill its raw material needs. MDL maintained its 6th position within the sector on a consolidated basis and recorded an incline of ~19% in revenue. However, the company could not regain net profitability although improvement in Gross and operating margins was observed during the year. The financial risk profile of the company has remained adequate characterized by a stretched working capital cycle, modest coverages, and stressed cashflows. The company has a leveraged capital structure with short-term borrowings significantly dominating the debt portfolio. Also, long-term borrowings are availed to fund brand acquisitions and expansion. Going forward, the financial risk profile of the company is expected to improve as MDL is pursuing a robust product localization plan, the impacts of which are expected to contribute positively to the company’s margins. Moreover, the positive effect of the deregulation of prices of Non-Essential drugs and the decrease in the interest rates will be visible in the financial performance of MDL in the coming year.
The ratings are dependent on the management’s ability to sustain its growth in revenues, margins, and improvement in profitability. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative. Further, maintaining leverage at an adequate level will be imperative for the ratings.

About the Entity
MDL was incorporated in Pakistan on February 6, 1995, as an unlisted public limited company. In 2010, MDL acquired the Roche facility in Pakistan along with the acquisition and brand licensing of the global product lines from Hoffman-La Roche, Switzerland. Mr. Ali Akhai is the ultimate beneficial owner of the Company. MDL has a 4 members board including the Chairman, Mr. Ali Akhai, Mr. Javed Ghulam Muhammad (CEO), Mr. Abdul Samad (Group CFO), and Mr. Syed Dawood (Independent Director).