The Pakistan Credit Rating Agency Limited
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Saliha Sajid

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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 sustained business profile appended by good sector
dynamics. The company focuses on geographies closer to the plant location; Gujranwala division remained company’s home market - Lahore, Faisalabad and Multan are company’s next focus. Announced capacity expansion 1.0mln tons with contract finalized with a Chinese Supplier (CITIC HIC) is expected to strengthen Gharibwal's position. Over last few years business profile has shown steady improvement - on account of strong demand. However, margins declined during 1HFY18 mainly due to lower retention prices and increased international coal prices on average basis. Going forward, with translation of rupee depreciation, the margins are expected to remain under pressure. Continuation in demand trend and Gharibwal Cement's ability to build requisite efficient supply chain remains important. The financial profile of the Company is expected to remain adequate. The leveraging is expected to increase in medium term in pursuit of expansion.

The ratings are dependent on upholding of the company’s business vis-à-vis financial risk profile. Any significant deterioration in the sector’s outlook particularly any unfavorable change in demand and expansion matrix, thereby exerting pressure on prices and margins, may negatively impact the ratings.

About the Entity
Gharibwal Cement Limited, commenced operations in 1965, is listed on PSX. The company is engaged in manufacturing, marketing and sale of Ordinary Portland Cement. The company has installed cement capacity of 2.1mln tpa (market share: 4.4%). Also, announced expansion of 1.0mln tons, planned CoD: Dec18, will add to this. The company is majority owned by Mr. Tausif Peracha (~58%), founder of Gharibwal Group, followed by Rafique Family (~33%) having interest in real estate business abroad. Gharibwal Group has interests in glass manufacturing, lubricants and real estate projects locally and shipping and truck manufacturing in Nigeria.

The overall control of the company vests with eight member BoD, including two independent director (One nominee director by BOP). Peracha family has four representatives, including CEO. The Chairman and 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.