The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Gharibwal Cement Limited

Rating Type Entity
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Gharibwal Cement's strength in its key markets. The company focuses on geographies closer to the plant location; Gujranwala division remained company’s home market. Owing to prevailing slowdown in demand, the company decided to delay its capacity enhancement plan. Upcoming industry wide expansions of 11.7mln tpa (North Region only) commissioning by Sep-19 and slowdown in the growth of local demand seems a challenge. The demand needs to be up to secure companies’ margin. Export is another avenue. Industry wide exports (sizeable increase in South Region) have gone up due to muted growth in local demand. A new export window is created in Bangladesh market. Previously, cement exports were seen at its peak after financial crisis in 2008. The company’s business profile remained adequate on account of decreased operating and EBITDA margins and squeezed profitability. The company’s margins squeezed, industry wide phenomenon, on account of; 1) international coal prices hike and relevant duties 2) increase in FED 3) lower retention prices, 4) depreciation in Pak rupee. Lately, the coal prices showed downward trend due to cutdown of imports by China- are expected to remain range bound in medium term. The financial profile of the Company is expected to remain adequate. The leveraging is expected to remain at same level owing to delay in expansion planning & no intentions for any further borrowing.
The ratings draw comfort from sponsor families, having prime focus of the company.The ratings are dependent on improvement of the company’s business vis-à-vis financial risk profile in current economic scenario. Industry’s dynamics encompassing expected challenges of supply glut, decline in local demand or deterioration in cement prices will negatively affect the ratings.

About the Entity
Gharibwal Cement Limited, operating with cement capacity of 2.1mln tpa (market share: 3.9%)as at Jan-19. Also, announced expansion of 1.0mln tons, delayed its commencement till 2 years. The company is majority owned by Mr. Tausif Peracha (~56%), founder of Gharibwal Group, followed by Rafique Family (~27%). Gharibwal Group has interests in glass manufacturing, lubricants and real estate projects locally as well as abroad and shipping and truck manufacturing in Nigeria. The Company’s seven-member BoD, including two independent director. Peracha family has four representatives, including CEO. Two other directors represent Rafiq Family on board. Mr. Tousif Peracha, the CEO, is supported by a team of experienced individuals.

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.