PACRA Maintains Entity Ratings of Ghani Chemical Industries Limited

The rating reflects the prominent position of Ghani Chemical Industries Limited (GCIL) in the manufacturing, sale, and trading of medical & industrial gases and chemicals. The industry largely possesses an oligopolistic structure, benefiting the players, which allows GCIL to consistently deliver high-quality products and services. These gases find diverse applications across various industries encompassing medical, chemical processes, metal fabrication, food processing, oil and gas exploration, and many more. During Covid-19, the installation of dedicated medical gas capacities in hospitals resulted in a change in the revenue mix and showed considerable growth in the healthcare segment. As of now, the product portfolio has stabilized along the demand yield curve, indicating a more balanced and consistent state in the industry. The demand from the steel, automotive, and shipbreaking industries remained weak due to the country’s macroeconomic challenges. In line with its commitment to expanding and strengthening its operations, the board of directors of GCIL has merged G3 Technologies Limited with/ GCIL and successfully achieved its objective of getting listed on the Pakistan Stock Exchange (PSX). During 6MFY23, the topline of the company declined by ~8% as compared to the same period last year, and margins also showed dilution at all levels due to macroeconomic turbulence which resulted in reduced demand by large-scale manufacturing. All four plants of Ghani Chemical Industries Limited are currently operational and overall capacity utilization stood at ~65%. Due to reduced demand from one of the renowned customers, the company’s dedicated plant was under-utilization. The Company has already commenced the construction work for the setup of its 5th Air Separation Unit (ASU) Plant of 275 TPD capacity for medical and industrial gases in KPK. As a part of the import substitution strategy, the company is also setting up a calcium carbide manufacturing plant in KPK and is in the process of receiving necessary approvals from the environment protection agency. The financial risk profile of the company is deemed satisfactory, with comfortable coverages, cash flows, and a stretched working capital cycle which is an industry norm. The company's capital structure is leveraged, with borrowings consisting of long-term to support expansion and short-term for working capital management.
The ratings are dependent on the Company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further deterioration would have negative implications for the ratings. Consistent growth in market share and improved margins would support ratings.

About the Entity
Ghani Chemical Industries Limited is a listed entity, incorporated in 2015. The company is primarily engaged in the manufacturing, sale, and trading of industrial, and medical gases and chemicals. Pursuant to the Scheme of Arrangement for merger/amalgamation of G3 Technologies Ltd. with and into Ghani Chemical Industries Ltd., sanctioned by the Lahore High Court vide Order dated October 11, 2022, Pakistan Stock Exchange listed Ghani Chemical Industries Ltd., w.e.f. November 14, 2022. The Company is a subsidiary (~58%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family (~51.62%). The remaining shareholding lies in Ghani Products (Pvt.) Ltd ~18%, directors of the company and the general public. Members of sponsoring family majorly represent Ghani Chemicals’ four-member board. Mr. Masroor Ahmad Khan is the Chairman of the board while Mr. Hafiz Farooq Ahmad holds the office of CEO. They are assisted by a management team with extensive experience and a diversified skillset.