Tufail Chemical Industries Limited

CREDIT RATING REPORT | Aug-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
12-Aug-25 A- A2 Stable Maintain YES
12-Aug-24 A- A2 Stable Maintain YES
23-Aug-23 A- A2 Stable Maintain -
23-Aug-22 A- A2 Stable Maintain -
23-Aug-21 A- A2 Stable Maintain -
About the Entity

Tufail Chemical Industries Limited was incorporated in 1993 and commenced operations in 1995 as a public unlisted company. It is a family-owned and managed business, with the entire shareholding held within the Zubair family. As per the proposed structure, 45% of the shares are held by Mr. Zubair Farid Tufail, 25% by Mr. Salman Tufail, and 10% each by Mrs. Ghazala Zubair, Ms. Fariha Nasir, and Syed Azfar Ali Nasir. Mr. Zubair Tufail serves as the Chairman of the Board, which is comprised entirely of his close family members.

Rating Rationale

Tufail Chemical Industries Limited (‘TCIL’ or ‘the Company’) is primarily engaged in the production and sale of specialized chemicals in Pakistan. The ratings reflect TCIL’s leading position in domestic manufacturing of surfactants (key raw material for detergents & shampoo industry) and strong customer base – with a mix of local and multi-national companies (MNCs). In FY24, the Tufail family undertook a restructuring of the group, and the two brothers divided the family business. Zubair family and Pervaiz family will now lead separate entities: TCIL and TMIL (Tufail Multichem Industries Pvt. Limited), respectively. TCIL’s current annual production capacity stands at ~53,838MT for LABSA, ~17,763MT for SLS/SLES, and ~43,796MT for textile chemicals. The outlook for the chemical sector, particularly in LABSA, SLES, and textile-related chemicals, remains stable, supported by consistent demand from fast-moving consumer goods (FMCG) segments such as detergents, personal care, and textiles. Local manufacturers are gradually expanding capacities to reduce reliance on imports, meet growing domestic demand, and tap into regional export opportunities. While the sector continues to face challenges, including fluctuations in raw material prices and energy costs, it has shown notable resilience. The Company is well positioned within this landscape, backed by its established market presence, diversified product portfolio, and ongoing focus on innovation and process enhancement aimed at improving operational efficiency and responsiveness to customer needs. During 9MFY25 the Company’s net sales stood at ~PKR 9,233mln and reflecting an annualized growth of ~40% as compared to FY24 ~PKR 8,769mln. This growth was primarily driven by an ~18% increase in sale volumes and upward price adjustments. However, margins diluted across all levels, mainly due to elevated raw material and energy costs which could not be fully passed on to customers. Tufail Chemical Industries Limited’s governance framework reflects limited independent oversight, as the Board primarily comprises close family members, indicating an area for potential improvement. The formal establishment of an internal audit function would further enhance the Company’s control environment. Going forward, the Company plans to improve operational efficiency and sustainability through infrastructure upgrades, solar energy integration, and plant optimization. In addition, two major projects are currently in the implementation phase: electricity generation from sulphuric acid plant steam and installation of an RO water plant to fulfill the plant’s complete water requirements, both of which are expected to become operational soon. These initiatives are expected to be financed through a mix of equity and debt. The financial risk profile is marked by modest coverage ratios, cash flow generation and stretched working capital cycle. The capital structure is leveraged, with borrowings comprising long-term facilities to support CAPEX and short-term lines utilized for working capital requirements.

Key Rating Drivers

The ratings are dependent on the Company’s ability to sustain its market position. Furthermore, sustained growth in revenues, and improvement in margins, as depicted in financial projections shall remain imperative.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Tufail Chemical Industries Limited

rating analysis

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Profile
Legal Structure

Tufail Chemical Industries Limited (Tufail Chemical) was incorporated in 1993 and commenced operations in 1995 as a public unlisted company.


Background

Tufail Chemical has an established presence in the local chemical industry. Initially, the family was involved in chemical trading. In 1993, the family transformed its distribution network in the manufacturing business through Tufail Chemical Industries Limited. 


Operations

The Company’s cumulative current production capacity stands at ~115,396 metric tons, with power requirements of ~1.9MW, primarily met through internally operated gas-fired generators. Coal and diesel-based generators serve as backup sources, while the Company is also in the process of procuring power lines from K-Electric to further diversify its energy mix. Additionally, two key projects are in the implementation phase: electricity generation from sulphuric acid plant steam and installation of an RO water plant to meet the plant’s complete water requirements. Both projects are expected to become operational soon.


Ownership
Ownership Structure

Tufail Chemical is a family-owned and managed business. Out of the total shareholding, Mr. Zubair Farid Tufail along with his family members—Mrs. Ghazala Zubair and Mr. Salman Tufail—collectively own 80% stake. The remaining 20% shareholding is held by Mr. Syed Azfar Ali Nasir and Mrs. Fariha Nasir, who are also part of the extended family.


Stability

The distribution of shareholding among Mr. Zubair Farid Tufail, his immediate family, and extended family members reflects a concentrated and well-structured ownership profile. The involvement of the second generation is already evident, with active participation in the business and representation at the executive level, including the position of Executive Director within the Company.


Business Acumen

Mr. Zubair Tufail inherited a chemical trading company and transformed it into one of the largest manufacturers of surfactants in Pakistan. He was elected as the president of the Pakistan Chamber of Commerce and Industry for the year 2017. Mr. Zubair Tufail is well-known for his acumen in the chemical industry of Pakistan.


Financial Strength

Tufail Chemical has expanded its footing in the entertainment business through PEG (Pvt.) Limited. The family hasa collective net worth of over ~PKR 1.0bln, portraying adequate financial strength to support the Company if needed.


Governance
Board Structure

Tufail Chemical’s board comprises three members, all of whom belong to the Tufail family, reflecting concentrated family representation. Mr. Zubair Farid Tufail serves as the Chairman of the Board and also holds the position of Chief Executive Officer (CEO). The remaining two directors, Mrs. Ghazala Zubair and Mr. Salman Tufail, also serve in executive capacities, indicating a fully executive board composition.


Members’ Profile

Mr. Zubair Farid Tufail, Chairman & CEO holds a graduate degree and brings with him over six decades of experience in the chemical industry. He has played a pivotal role in the growth and strategic direction of Tufail Chemical Industries Limited, with longstanding contributions to both operational leadership and industry representation. 


Board Effectiveness

During FY24, members' attendance remained strong, and meeting minutes were formally documented. The Company's board is dominated by family members with no independent oversight. However, the Company is planning to induct independent directors in the near future.


Financial Transparency

M/S Naveed Zafar Ashfaq Jaffery & Co. are the external auditors of the Company. The auditor is listed in Category “A” of the SBP's panel of auditors and expressed an unqualified opinion on the Company’s financial statements for the period ended June 30th, 2024.


Management
Organizational Structure

The Company operates with five functional departments, each headed by an experienced Head of Department (HoD). All HoDs  report directly to the Chief Executive Officer, Mr. Zubair Farid Tufail, who oversees the day-to-day operations of the business.



Management Team

Tufail Chemical Industries Limited is led by a seasoned management team with deep industry knowledge and operational expertise. The leadership is spearheaded by Mr. Zubair Farid Tufail, who serves as Chairman and CEO, supported by experienced professionals heading key functional areas. The team brings decades of collective experience in the chemical sector and plays a vital role in driving the company’s strategic and operational objectives.


Effectiveness

The Company’s production facility is equipped with multiple quality control labs with real-time surveillance by the Director of Technical Operations to ensure optimal monitoring. The key management personnel meet on a weekly and monthly basis to proactively address operational issues.


MIS

The Company implemented ER Manager in 2012 as an ERP solution having 15 modules that can be mixed and matched as per business needs. The Company successfully upgraded its ERP by implementing the latest version of SAP which went live in May 2020.


Control Environment

The Company has in place a European automated system to control & monitor the Sulphonation process. Moreover, filling area surveillance is done through a dedicated system. The production details related to yield & quality for each product are shared with the senior management on a real-time basis.


Business Risk
Industry Dynamics

Pakistan’s chemical industry is broadly segmented into four major categories: (i) Basic Chemicals, (ii) Life Sciences, (iii) Specialty Chemicals, and (iv) Consumer Products. Tufail Group’s product portfolio is primarily concentrated in the Basic Chemicals segment, encompassing high-demand products such as caustic soda, soda ash, and LABSA/SLES. The sector outlook remains stable, particularly for LABSA, SLES, and textile-related chemicals, underpinned by sustained demand from fast-moving consumer goods (FMCG) sectors including detergents, personal care, and textiles. Domestic players are increasingly undertaking capacity expansions to reduce import dependence, cater to rising local demand, and explore regional export potential. Despite challenges such as volatility in raw material prices and elevated energy costs, the industry has demonstrated resilience. Within this evolving landscape, the Company is well positioned, supported by its established market footprint, diversified product mix, and continuous focus on innovation and process improvements aimed at enhancing operational efficiency and customer responsiveness.


Relative Position

Tufail Group ranks among Pakistan’s leading chemical manufacturers and retains a dominant position in the surfactants segment. Tufail Chemicals Industries Limited (TCIL) operates the country’s largest surfactant manufacturing facility and is positioned among the top five chemical manufacturers by revenue. The Company caters to a diversified clientele comprising both multinational corporations (MNCs) and prominent local manufacturers, underpinning its entrenched market position. Within the sector, other notable players include Tufail Multichem Industries Limited (TMIL), a group entity with a production capacity exceeding ~100,000MT and Ittehad Chemicals Limited (ICL), which maintains an annual production capacity of ~70,000MT for LABSA and SLES.


Revenues

During 9MFY25 the Company’s net sales stood at ~PKR 9,233mln and reflecting an annualized growth of ~40% as compared to FY24 ~PKR 8,769mln. This growth was primarily driven by an ~18% increase in sale volumes and upward price adjustments. The revenue mix continues to be dominated by local sales (~99%), with exports remaining minimal. Around ~80% of the local revenue is derived from surfactants (LABSA, SLS & SLES), catering to local and MNC clients such as Procter & Gamble Pakistan and Unilever Pakistan. The company also engages in toll manufacturing services on a demand basis. Although top 10 customer concentration remains high, longstanding client relationships provide a measure of comfort.


Margins

During 9MFY25, the gross margin slightly declined to ~11.7% (FY24: ~14.2%), primarily due to elevated raw material and energy costs. Operating and net margins were recorded at ~6.2% and ~0.9%, respectively (FY24: ~7.6% and ~1.3%). The Company reported a net profit of ~PKR84mln during 9MFY25, compared to ~PKR116mln in FY24. The moderation in bottom-line profitability reflects the impact of rising input and operational costs, which could not be fully passed on to customers.


Sustainability

TCIL regularly invests in R&D which has yielded a specialized product range, especially variants of surfactants. The Company has sufficient orders in hand due to a niche customer base consisting mostly of MNCs.


Financial Risk
Working capital

Gross working capital days increased slightly to ~117 days in 9MFY25 (FY24: ~111 days), while net working capital days also rose to ~95 days (FY24: ~81 days). The elongation in working capital cycle is primarily attributable to higher trade receivables and inventory levels. Nevertheless, the current ratio remains comfortable at ~3.2x (FY24: ~4.2x).


Coverages

The Company posted healthy Free Cash Flows from Operations (FCFO) of ~PKR 805mln in 9MFY25, compared to ~PKR 722mln in FY24 reflecting a ~11.5% improvement. Despite this, the interest coverage ratio remained unchanged at ~2.1x, given a simultaneous increase in finance cost (~PKR 344mln vs. ~PKR 473mln in FY24). Debt coverage, measured by FCFO to total finance cost and borrowings, improved to ~2.4x (FY24: ~1.6x).


Capitalization

The Company’s capital structure remains on the leveraged side with a gearing ratio of ~55.1% as at 9MFY25 (FY24: ~54.9%). Borrowings comprising long-term facilities to support CAPEX and short-term lines utilized for working capital requirements.


 
 

Aug-25

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Tufail Chemical Industries Limited

financial summary

(PKR mln)

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Mar-25
9M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 2,623 2,316 3,540 3,872
2. Investments 50 50 94 0
3. Related Party Exposure 0 0 1,278 1,218
4. Current Assets 5,661 5,085 2,924 5,927
a. Inventories 1,397 1,830 818 1,717
b. Trade Receivables 2,880 1,806 898 2,865
5. Total Assets 8,334 7,451 7,835 11,017
6. Current Liabilities 1,795 1,207 1,647 2,303
a. Trade Payables 898 603 833 1,523
7. Borrowings 3,297 3,173 1,440 3,631
8. Related Party Exposure 0 0 84 0
9. Non-Current Liabilities 554 468 604 927
10. Net Assets 2,687 2,603 4,060 4,156
11. Shareholders' Equity 2,687 2,603 4,060 4,156
B. INCOME STATEMENT
1. Sales 9,233 8,769 17,004 17,243
a. Cost of Good Sold (8,152) (7,520) (14,743) (14,492)
2. Gross Profit 1,081 1,249 2,261 2,751
a. Operating Expenses (512) (586) (1,149) (1,539)
3. Operating Profit 569 664 1,111 1,212
a. Non Operating Income or (Expense) 0 40 (83) (190)
4. Profit or (Loss) before Interest and Tax 569 704 1,028 1,022
a. Total Finance Cost (344) (473) (663) (457)
b. Taxation (140) (115) (212) (242)
6. Net Income Or (Loss) 84 116 153 322
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 805 722 1,014 1,308
b. Net Cash from Operating Activities before Working Capital Changes 805 244 311 899
c. Changes in Working Capital 0 (1,759) 2,189 (1,867)
1. Net Cash provided by Operating Activities 805 (1,516) 2,500 (968)
2. Net Cash (Used in) or Available From Investing Activities 0 (234) (99) 516
3. Net Cash (Used in) or Available From Financing Activities 0 1,706 (2,269) 607
4. Net Cash generated or (Used) during the period 805 (44) 132 154
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 40.4% -48.4% -1.4% 84.1%
b. Gross Profit Margin 11.7% 14.2% 13.3% 16.0%
c. Net Profit Margin 0.9% 1.3% 0.9% 1.9%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 8.7% -11.8% 18.8% -3.2%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 4.2% 3.5% 3.7% 9.1%
2. Working Capital Management
a. Gross Working Capital (Average Days) 117 111 68 81
b. Net Working Capital (Average Days) 95 81 42 53
c. Current Ratio (Current Assets / Current Liabilities) 3.2 4.2 1.8 2.6
3. Coverages
a. EBITDA / Finance Cost 2.1 2.1 2.1 3.7
b. FCFO / Finance Cost+CMLTB+Excess STB 1.9 1.6 1.5 2.4
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.2 0.0 0.4 0.4
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 55.1% 54.9% 27.3% 46.6%
b. Interest or Markup Payable (Days) 58.5 40.6 34.3 83.4
c. Entity Average Borrowing Rate 15.4% 19.1% 24.5% 12.6%

Aug-25

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Tufail Chemical Industries Limited

rating scale

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Aug-25

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Tufail Chemical Industries Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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Aug-25

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