The Pakistan Credit Rating Agency Limited
Press Release


Raniya Tanawar

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Debt Instrument Rating of Pak Arab Fertilizers Limited | TFC

Rating Type Debt Instrument
Action Maintain Maintain
Long Term A- A-
Short Term - -
Outlook Stable Stable
Rating Watch Yes Yes

The company leverages on its ownership strength derived from Fatima Group and Arif Habib Group. Sponsor patronage in the shape of a turnaround plan has come to the rescue. A group level business strategy has been laid out as per which Fatima Fertilizer Company Limited(FFCL) is planned to acquire its wholly owned subsidiary-Fatimafert Limited along with major operating plants of its associated Company Pakarab Fertilizers; including Ammonia, Urea, Nitric Acid, NP, CAN and clean development mechanism. Materialization of the proposed plan is to be achieved as regulatory approvals are being sought. The strained risk profile of the company, owing to gas curtailment persisted to be the major hurdle. The Company's financial profile is reflected by a thin topline, majorly secured through DAP trading. Diminishing margins accompanied by hiked borrowings added additional stress to the dwindled position. Post-acquisition, Pakarab Fertilizer is expected to develop a small yet a sustainable business model. Revenue stream would majorly include income from DAP trading, Carbon Dioxide plant activity, and other non core activities, these income stream alongside consideration for acquisition from Fatima Fertilizer should enable the company in meeting its financial need.
The rating are kept under 'Rating watch' to surveil the roll-out of the acquisition plan. The ratings would be updated once the evolving position is settled.

About the Entity
Pakarab Fertilizer Limited is owned by a consortium between two major business groups in Pakistan namely Fatima Group and Arif Habib Group. Arif Habib Group ranks amongst the prominent financial services group in Pakistan and holds interests in securities brokerage, investment and financial advisory, investment management, commercial banking, commodities, and private equity, cement and fertilizer industries. Fatima Group is one of the leading corporate groups in Pakistan, engaged in trading of commodities, manufacturing of fertilizers, textiles, sugar, mining and energy. Currently, Pakarab's fertilizer complex is located in Multan with a nameplate capacity of 846,900 MTPA, whereas the company's head office is situated in Lahore.

The board comprises eight members; equally represented through Arif Habib and Fatima Group. Mr. Fawad Ahmed Mukhtar is the Chief Executive Officer of the Company. He possesses vast business acumen spanning over three decades and has been associated with the company since

About the Instrument
Pakarab has a privately placed term finance certificates (PPTFC) of PKR 450mln, issued in May-16 with a tenor of five years. The PPTFC would be payable at 6M KIBOR plus 1.90% per annum. Payments would be payable in six equal installments with the first payment falling at the end of 30th month (30th December 2018) from the first disbursement date (30th June 2016) and subsequently every six months afterwards till June 2021.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.