PACRA Maintains Entity Ratings of Azhar Corporation (Pvt.) Limited

Pakistan's home and laundry care market has experience an annual growth rate of 2.02% (CAGR 2023-2028). The largest segment in this market is Laundry Care, with a market volume of US$1.30bn in 2023. Sales of home and laundry care products in Pakistan have witnessed a significant surge, driven by increasing consumer awareness and the growing middle-class population. Pakistani soap imports are expected to drop to 4,801,700 kilograms in 2026, a decrease of 0.4% year-on-year. The market of detergents is projected to experience an annual growth rate of 19.34% (CAGR 2023-2028).
The ratings reflect Azhar Corporation's diversified revenue stream and strong presence in the laundry soap segment with their established brand 'Gai Soap'. Being a key player in this market segment, the Company derives the majority of its revenue from sales within the local market. Aligned wit prevailing industry trends, the Company maintains a presence in the detergent market (Powder detergent - Gai Powerwash and Xtra Neat). The Company has presence in branded Vegetable Ghee/Edible Oil segment, with- Gai Banaspati and Gai Cooking Oil. The product line of Oil/Ghee of the Company is currently undergoing a challenging phase, exhibiting a fluctuating trend that is influencing the overall performance. The Company experienced a growth in revenues, reaching PKR 6,526 million in FY23 compared to PKR 6,025 million in FY22. Additionally, for the first quarter of FY24, revenues amounted to PKR 1,828 million. Gross profit margins (FY23: 12.5%, FY22: 13.1%) remain stable owing to effective cost management. Whereas, net profit margins of the Company decreased and stood at 1.2% in FY23 ( FY22: 2.3%) due to increase in finance cost (FY23: PKR 368mln, FY22: PKR 192mln), owing to increase in markup rates. Financial profile of the Company remains stable owing to moderately leveraged capital structure; major portion of which consists of short-term debt (FY23: PKR 1,872mln, FY22: PKR 1,945mln), obtained to finance the working capital requirements. Over the years, the consistent backing from sponsors positively influences the ratings. Growing number of local suppliers, the working capital management of the Company remains stretched. The forthcoming projects within the Company's pipeline, specifically in the domain of makeup products, are expected to contribute value to the company's performance in the near future.
The ratings are dependent on the management's ability to prudently manage its market share, while maintaining business margins. Pressure on business volume and margins owing to the high input cost and a perfect competitive market may negatively impact the ratings.

About the Entity
Azhar Corporation (Pvt.) Limited was incorporated in 1979, and principally manufactures Personal, Homecare, and Edible Oil products at an installed capacity of 126,000MT/annum. These include Laundry Soap, Beauty Soap, and Detergent Powders. The Company also manufactures Vegetable Ghee and Cooking Oil at an installed capacity of 45,000MT/annum. Ownership of the Company vests equally with the families of Mr. Azhar Iqbal and Mr. Hassan Munawwar (~ 50% each). The Board is dominated by the Sponsoring family, and includes Mr. Azhar Iqbal and Mr. Hassan Munawwar, Ms. Khadija Azhar and Ms. Zainab Azhar. They are assisted by a team of professionals.