Tufail Starchem Industries (Private) Limited (the Company) is an unlisted private limited company incorporated in Pakistan on 8 June 2023 under the Companies Act, 2017. It is a wholly owned subsidiary of Tufail Multichem Holdings (Private) Limited, which is the holding entity of the Pervez Group. The registered office is situated at 4B, 4th Floor, Dolmen Executive Tower, Clifton, Karachi, the regional office is located at 1st Floor, Flat 2, Usman Block, New Garden Town, Lahore, and the manufacturing facility is located at Rosa Village, 1.5 kilometres off 7 kilometre Raiwind Manga Road, District Kasur.

The Company was established through the restructuring of the Tufail Group under a Scheme of Arrangement jointly petitioned on 29 January 2024 and sanctioned by the High Court of Sindh on 20 June 2024, with an effective date of 1 July 2023. Under the scheme, Tufail Chemicals Industries Limited was demerged into three undertakings: the Port Qasim business, transferred to Tufail Multichem Holdings (Private) Limited; the Lahore business, transferred to the Company; and the Karachi business, retained by Tufail Chemicals Industries Limited. The restructuring separated the businesses between two groups, with the Pervez Group represented by Mr. Pervez Tanveer Tufail, his family and associates, and the Zubair Group represented by Mr. Zubair Farid Tufail and his family. Within the Pervez Group, Tufail Multichem Holdings (Private) Limited holds the Company, Tufail Multichem Industries (Private) Limited and Tufail Chemicals UK Limited as subsidiaries, while Tufail Chemicals Industries Limited, with its retained Karachi undertaking, falls under the Zubair Group. The separation was intended to enable each group to pursue its own strategic vision, allocate capital and mobilise resources independently, improve operational effectiveness, and establish a structured succession plan.

The Company manufactures a range of industrial chemicals at its single production facility in Kasur, including sulphuric acid (98% strength), formic acid, alum sulphate (14%), sodium sulphate, Acetex Plus, N-butyl acetate and acetic acid. Its customer base spans textile mills, fertilizer producers, packaging manufacturers and chemical traders, with domestic sales distributed across the Central, South and North regions and a small volume exported. The Company’s installed capacity is stated at 50,000 tons per annum, measured against the prime product, despite the facility’s multi-product operations.

The Company is wholly owned by Tufail Multichem Holdings (Private) Limited, which is controlled by the Pervez Group, represented by Mr. Pervez Tanveer Tufail and his family. Accordingly, effective control over the Company’s strategic direction rests with the Pervez Group. The shareholding remains entirely promoter-held, with no institutional, foreign, or public shareholders.

The only ownership change in the Company's history is its creation through the Scheme of Arrangement, under which the Tufail group was divided between the Pervez Group and the Zubair Group on the basis of shareholdings in Tufail Chemicals Industries Limited, which stood at 50.98 percent for the Zubair Group and 49.02 percent for the Pervez Group, using consolidated book values as at 30 June 2023. The scheme was sanctioned by the High Court of Sindh, and the group states that it was designed to give each side a streamlined succession plan. The sponsor's commitment to the Company has taken the form of continuing financial support from the associated company Tufail Multichem Industries (Private) Limited, described under Section 2.4.

The wider group demonstrates established industrial business acumen, reflected in the phased development of its manufacturing infrastructure and supporting utilities over time. Investments in captive power generation, water treatment, filling facilities, and process control systems indicate an understanding of the operational requirements of chemical manufacturing and the importance of supporting production efficiency. The implementation of control systems for CAPB and sodium sulphide lines in 2025 further reflects continued efforts to strengthen process management.

The Group’s capacity and willingness to support the Company are evidenced by substantial and recurring financial assistance extended through Tufail Multichem Industries (Private) Limited. However, the support is provided in the form of short-term, unsecured intercompany lending rather than equity, limiting its permanence. Moreover, as Tufail Multichem Industries also finances the wider Group, its capacity to provide continued support remains linked to its own financial position and competing funding requirements.

The Board comprises six members, including three executive directors and two non-executive directors, with three female directors. The composition reflects a strong executive presence, with half of the Board directly involved in executive management. While female representation supports diversity at the Board level, the absence of independent directors limits the representation of independent perspectives and the extent of objective oversight over management decisions. Greater Board independence would strengthen governance practices, enhance oversight of strategic and operational matters, and support a more balanced decision-making framework.

The Board is led by Mr. Pervez Tanveer Tufail, Chairman and Chief Executive Officer, who represents the Pervez Group and has extensive experience in the chemicals business. His career began as a partner in M. Tufail & Brothers, followed by senior executive roles in the Tufail Group from 1993. He has led the commissioning of plants for formic acid, sulphuric acid and sodium sulphate, which form part of the Company’s core product portfolio. Mr. Adeel Shahid is an ACCA-qualified professional with over two decades of experience in finance and ERP-led business transformation, gained at PwC UK, Deloitte and the Group. He also led the restructuring under which the Company was formed. Mr. Mubashir Ahmed holds an MBA and has over three decades of experience in chemical manufacturing, marketing and operations, and holds office in the Pakistan Chemical Manufacturers Association. The Board thus brings relevant industry, financial and restructuring expertise. However, its composition remains closely aligned with the sponsor and the wider Group, with no independent or non-executive directors identified and no Board committee structure reported. Board meeting attendance details were also not provided. Consequently, while the Board's collective experience supports strategic oversight, the absence of independent representation limits the scope for independent challenge and oversight of management.

With four of the six directors holding executive or officer roles and the Chairman also acting as Chief Executive, the board's capacity to provide critical and impartial oversight of management performance is structurally constrained, since the individuals responsible for execution constitute the majority of the body responsible for oversight. Alignment between shareholder and management objectives is, however, inherently strong, given that the sponsor family both owns and manages the Company through the holding structure.

The external auditor, Naveed Zafar Ashfaq Jaffery & Co., Chartered Accountants, is in Category A of the State Bank of Pakistan’s panel of auditors and holds a satisfactory Quality Control Review rating from the Institute of Chartered Accountants of Pakistan. The firm is also a member of an international association of independent accounting firms. The auditor expressed an unqualified opinion on the Company’s financial statements for the year FY25.

The Company’s organizational structure is headed by the Chairman & CEO, with the Finance & Transformation, Human Resources, Administration, Research & Development (R&D), Information Technology (IT), Plant Operations, Supply Chain, Production, Maintenance, Quality Assurance/Quality Control (QA/QC), and Sales & Marketing functions forming part of the organizational framework. The Finance & Transformation function covers financial reporting, treasury, taxation, and accounts, while plant operations are supported by dedicated production, maintenance, and quality control functions. The structure provides for functional specialization across corporate, technical, and operational activities, with departmental responsibilities assigned to designated heads and managers.

Senior management is closely integrated with the Board and the wider Group, with key individuals holding overlapping roles across the Company and Tufail Multichem Industries (Private) Limited. Mr. Pervez Tanveer Tufail serves as Chairman and Chief Executive Officer, while Mr. Mubashir Ahmed, as Chief Operating Officer, brings extensive experience in marketing, sales and operations, including engagement with large industrial and multinational customers. Mr. Adeel Shahid holds responsibility for finance, IT and HR. He has also undertaken external training and advisory engagements since 2025. Ms. Ayesha Pervaiz serves as Company Secretary and holds legal qualifications. Management's experience in the core product portfolio, coupled with the Group's restructuring and ERP implementation, supports operational continuity. However, reliance on a limited number of experienced individuals, overlapping responsibilities across Group entities and the Chairman's central role remain key considerations in assessing management depth and succession planning.

Management effectiveness is supported by the team's experience in the chemicals industry, particularly in manufacturing, marketing, sales and financial management. The Group's restructuring and implementation of an integrated ERP system also provide a basis for improved operational coordination and financial reporting. However, management depth remains a consideration, given the concentration of key responsibilities among a limited number of individuals and overlapping roles across Group entities. The Chairman's central role in both strategic and executive matters further increases reliance on key personnel. Accordingly, continuity of effective management will depend on clear accountability, adequate delegation and succession planning.

The Company runs SAP S4 HANA as its core enterprise resource planning platform, implemented in 2020 by ABACUS, a Pakistani implementation partner established in 1987, with an active update and support contract. The system runs on a dedicated in house server accessible from remote locations and covers finance, controlling, materials management, sales and distribution, procurement, plant maintenance, production planning and human capital management. Production areas are monitored through programmable logic based control and a central data acquisition system for all process plants, commissioned in 2016 and maintained by the group's maintenance team with vendor support as required, and management reporting uses Excel and Microsoft Power BI. The group's stated information technology vision is to make the business more productive and cost efficient through automated, collaborative and real time working.

The Company's control environment is supported by an integrated ERP system covering procurement, inventory, production, sales and financial reporting. Key controls include inventory valuation at the lower of cost and net realisable value, provisioning for slow-moving stock, expected credit loss assessment of trade receivables, and independent actuarial valuation of employee gratuity obligations.

Pakistan’s industrial chemicals sector is exposed to global commodity price movements, imported raw material costs, and fluctuations in downstream industrial demand. Sulphuric acid is a mature, volume-driven product primarily used in phosphate fertilizer production, while formic acid serves applications in animal feed, leather tanning, and textile processing. Demand for industrial chemicals is therefore closely linked to the performance of key consuming industries, particularly fertilizers, textiles, and leather, while product pricing remains sensitive to global supply-demand dynamics. Global supply disruptions intensified in 2026, as geopolitical tensions in the Middle East and restrictions on Chinese sulphuric acid exports contributed to a sharp increase in sulphur and sulphuric acid prices. Although prices subsequently retreated from their mid-year peaks, volatility in international markets continues to pose risks for producers dependent on imported inputs. In Pakistan, the impact of these movements is compounded by exchange rate fluctuations and the extent to which manufacturers can pass on higher input costs to customers. Reduced industrial electricity tariffs provide some relief, although changes in gas-related levies and continued uncertainty in energy costs remain relevant to production economics. Domestic chemical demand is linked to industrial activity and export-oriented manufacturing. Large-scale manufacturing grew by 6.1% in FY26, supporting demand across key downstream sectors. However, inflationary pressures and elevated interest rates continue to affect industrial customers’ purchasing power, manufacturers’ financing costs, and working capital requirements. Demand also varies with agricultural input requirements and the order cycles of textile and leather exporters. Barriers to entry vary across the sector. Chemical manufacturing requires capital investment, reliable feedstock access, and compliance with environmental requirements, whereas trading, blending, and repackaging activities have comparatively lower entry barriers, sustaining competition in commodity products. Supplier bargaining power remains elevated where producers depend on imported feedstocks or a limited number of suppliers, while bulk industrial buyers may exert pricing pressure and negotiate extended credit terms.

The Company maintains a relatively small presence in Pakistan’s industrial chemicals sector, with net sales of PKR 1,309.6mln in FY25, increasing to PKR 2,299mln in FY26. In comparison, major industry participants, including Sitara Chemical Industries Limited and Ittehad Chemicals Limited, operate at a significantly larger scale. However, the comparison is partly constrained by differences in product portfolios, as the listed peers manufacture a broader range of chemicals. Nevertheless, the Company’s comparatively smaller operating scale limits its market presence relative to established industry participants.

The Company’s net sales increased to PKR 2,298.6mln in FY26 (FY25: PKR 1,309.6mln; FY24: PKR 1,020.5mln), reflecting growth of 75.5% in FY26 and 28.3% in FY25. Revenue growth in FY26 was primarily driven by higher realisations in sulphuric acid and increased sales of N-butyl acetate and acetic acid, while overall sales volume declined by 4.6% to 17.5mln units. Sulphuric acid contributed 35.1% of product sales in FY26 (FY25: 23.5%), followed by formic acid at 22.0% (FY25: 36.5%) and N-butyl acetate at 18.8% (FY25: 9.3%). The increase in sulphuric acid revenue despite lower volumes reflects higher market prices, while the contribution of newer product lines has expanded the revenue mix. However, the sustainability of FY26 growth remains subject to the normalisation of commodity prices and demand. Customer concentration also increased, with Advance Minerals and Chemicals Co. accounting for 17.6% of net sales in FY26 (FY25: 4.2%). Sales remain predominantly domestic, with limited export revenue. The gross margin declined to 8.3% in FY26 (FY25: 11.5%), indicating limited pass-through of cost pressures under normal market conditions. Accordingly, the exceptional revenue growth in FY26 should be viewed in the context of price-led gains rather than expansion in sales volumes.

The Company’s gross margin improved to 21.1% in FY26 (FY25: 8.3%; FY24: 11.5%), primarily reflecting higher realisations amid a sharp increase in commodity acid prices and lower energy costs. EBITDA increased to PKR 353.2mln in FY26 (FY25: PKR 51.2mln; FY24: PKR 75.7mln), with the EBITDA margin improving to 15.4% (FY25: 3.9%; FY24: 7.4%). The subdued profitability in FY25 reflected higher raw material costs, a 90% increase in finance costs. The operating margin recovered to 13.6% in FY26 (FY25: 0.9%; FY24: 4.1%), while the net margin improved to 7.4% (FY25: -6.9%; FY24: 1.4%). Despite the recovery, the improvement in FY26 profitability was largely price-led rather than volume-driven. Sustaining the improved margins will therefore depend on commodity price trends, input cost management and better capacity utilisation.

The Company's sustainability is primarily dependent on its ability to maintain profitability amid volatility in raw material prices, manage working capital efficiently, and improve capacity utilisation. The recent improvement in margins appears partly driven by elevated commodity prices rather than a sustained increase in production volumes, leaving earnings vulnerable to price normalisation. Furthermore, reliance on short-term borrowings and financial support from an associated company exposes the Company to refinancing risk. While its diversified product portfolio and established presence in the industrial chemicals sector provide a basis for continuity, sustained financial performance will depend on effective cost management, stable raw material supplies, and the ability to translate improved realisations into consistent cash flows.

“Gross working capital days extended to 196 days in FY26 from 143 days in FY25, as both inventory and receivable days increased. Receivable days extended to 99 days from 86 days (FY24: 95 days), while inventory days rose to 98 days from 57 days. The longer inventory holding was therefore compounded by slower collections. Payable days rose to 75 days from 60 days (FY24: 37 days), with trade payables standing entirely with associated companies, and offset part of the increase. Net working capital days consequently extended to 122 days from 83 days (FY24: 59 days).

The Company’s cash flow and debt coverage indicators improved in FY26, supported by higher profitability and working capital releases. Free cash flow from operations (FCFO) increased to PKR 222mln in FY26 (FY25: negative PKR 63mln; FY24: PKR 68mln), with FCFO to finance cost improving to 6.8x (FY25: negative 0.8x; FY24: 1.6x).

The Company’s total borrowings increased to PKR 145mln in FY26 (FY25: PKR 20mln), reflecting higher reliance on external financing. The leverage ratio stood at 44%, with short-term borrowings accounting for 39% of the capital structure. Equity increased to PKR 461mln in FY26 (FY25: PKR 290mln), providing a larger equity base to support the Company’s operations.