PACRA Assigns Preliminary rating to Ismail Industries Limited | PPSTS | PKR 4bln | TBI

Based on mass marketing, the confectionery, biscuits and snack industry in Pakistan is highly price sensitive. Pakistan's large retail base is highly fragmented and dominated by small retailers. However, a major transformation of establishing large retail chains has been observed, particularly in urban centers. On the other hand, growth in disposable personal income of middle and upper middle class has led to improvement in the consumption pattern of branded non-essential items.
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 a promising profits in FY23 amounting PKR 6bln (FY22: PKR 2bln) due to export sales (FY23: PKR ~40bln, FY22: PKR ~15bln). The major reason of this increase in sales is the international projects undertaken by the Company. The total revenue of the company stood at PKR~99bln in FY23 (FY22: PKR ~65bln).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. Despite inflation and devaluation, a surge can be seen in the margins as net profit margin stood at ~7% in FY23 (FY22: ~5%). The introduction of new product line Giza Flour adds value in the company's profile and profits. However, major borrowings remain from SBP at subsidized rates. Current leveraging of the company is standing at 71%.The company is also planning to to change it's borrowing mix by issuing a short term PPSTS amounting PKR 4bln which may have impact on leveraging position of the company. While the company's working capital management and coverages remain adequate.
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 (~8%). 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 is in the process of issuing a rated, privately placed, unsecured Islamic commercial paper, Ismail Industries Limited | PPSTS | PKR 4bln |TBI of PKR 4bln.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.