PACRA Maintains Entity Ratings of Pharmagen Limited
The ratings reflect Pharmagen Limited (PL) strong business fundamentals. The pharmaceutical industry has witnessed a high rate of sustained growth over the years. Cost-efficiencies as well as demand inelasticity are benefiting the industry players. While product pricing has been a challenge, the new CPI-linked pricing criteria has allowed an increase in prices with respect to inflation, indicating a positive sign. The company imports majority of their raw material, thus increased currency fluctuation and pricing risk. However, PL is poised to derive benefits from group synergies in the form downward integration at front end. This could help PL, to diversify in different segments and reduces the concentration risk. Nevertheless, overall financial profile is considered adequate. Although coverages have been deteriorated, the company's designed financial strategy keeps sizeable cushion in short-term borrowing lines to meet shortfalls in operational cash flows in servicing debt obligations; this provides flexibility in management of financial affairs. Long association of experienced management team adds comfort.
The ratings are dependent on the company's ability to sustain margins. Meanwhile, management of debt (current and planned), thereby impacting coverages, is considered important. Furthermore, external factors such as any adverse changes in the regulatory framework and weakening of financial profile owing to delays in cash flow receipts, may impact the ratings.
Pharmagen Limited is a public limited-unquoted pharmaceutical company operating in Pakistan since 1990. The company is engaged in the manufacturing and sale of pharmaceutical products and over the years it has become the leading producer of APIs (Active Pharmaceutical Ingredients) in Pakistan. PL is majority owned by Pervez Hussain Sufi’s family (~60%), while other strategic partners include Rasheed Khan’s family (~15.2%), and Maj. Gen. (Retd.) Rahim Khan’s family (~2.1), along with trusts, Naghat Rasheed Trust and Kashmir Education foundation holding (~1.8%) and (~20.9%) respectively.