The Pakistan Credit Rating Agency Limited
09-May-19
Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Assigns Initial Entity Ratings to BBJ Pipe Industries Limited
| Rating Type | Entity | |
|
Current (09-May-19 ) |
||
| Action | Initial | |
| Long Term | BBB- | |
| Short Term | A3 | |
| Outlook | Stable | |
| Rating Watch | - | |
BBJ Pipes Industries Limited, a family operated business, is engaged in steel and polyethylene pipes industry. The company has been catering to the demand of government/corporate projects since last many years. The ratings reflect an adequate market presence of the company in a highly fragmented industry. Over the last few years, the company's business risk profile has strengthened on account of better volumetric sales. Furthermore, the company is expanding its production capacity which may bode well in coming years. Steel pipe industry has some vital players operating in the market yet BBJ has earned a good name in its respective niche. The Company operates on adequate but improving business margins. The financial risk revolves around higher short-term borrowings to support the working capital - inherent need of the business model followed by the company. The ratings also take into account strong equity base (1QFY19: PKR 2.44bln; FY18: PKR 2.42bln) - providing intrinsic risk absorption capacity. Going forward, the Company’s debt levels are expected to remain range-bound as no long-term financing is planned in foreseeable future.
The ratings are dependent upon the company’s ability to sustain and improve its business profile in the wake of challenges in current diluted economic scenario. Herein, effective and prudent management of financial risk indicators remain important.
About
the Entity
BBJ Pipes Industries Limited was incorporated in January 1991. The Company was converted into a public limited entity in 2013 under the company ordinance. It is primarily engaged in manufacturing of steel, iron and polyethylene pipes in several diameters range which are used in different government and private projects. The company is wholly owned by the sponsors- Zubair family. In FY18, The company established a subsidiary 'BBJ Steels Limited', for one of it's product lines (HRC to CRC). The company has 99.88% ownership in the subsidiary.
The overall control of Company vests with three members' board of directors, wherein all members are from sponsoring family including the Chief Executive Officer. Mr. Zubair Qayyum, a mechanical engineer by profession, is the founding member of BBJ Pipes Industries limited. He is an Ex-Army official. Two board members, Mr. Zubair (CEO) and his son, Mr. Ahmed (COO), are equipped with necessary technical skills to manage and oversee the business.