The Pakistan Credit Rating Agency Limited
Press Release


Ateeb Riaz

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 Assigns Initial Entity Ratings to Siddiqsons Tin Plate Limited

Rating Type Entity
(28-Jun-19 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect Siddiqsons Tin Plate’s established foothold in the tin plate industry as the first and sole local manufacturer of tin plate in Pakistan. Siddiqsons has a market share of ~31% in the local market. The demand for the Company’s products has shown growth in the recent past due to increased hygiene consciousness of the public at large and higher use of processed food. However, the company was unable to seize this opportunity due to inconsistent supply of its raw materials and steep competition from commercial importers, signifying business risk. Thus, the top line of the company has remained stagnant with low capacity utilization. The margins have decreased significantly in FY18 due to increase in cost of raw materials owing to rupee devaluation. Although the gross margins returned to historic levels, the net margins remained depressed facet of increased finance costs. The Company plans to establish a Cold Rolled Coil steel manufacturing complex to streamline its raw materials supply and boost margins. This is expected to improve profitability once the project comes online. The Company’s financial risk profile is considered adequate characterized by moderate leveraging and good coverages and stretched working capital. The Company conducted a right issue to partly finance the expansion project. The Company will increase borrowings to finance the project. However, the project will start production ~12 months prior to principle repayments for related loans. This will create cushion for repayment from ensuing cash flows. The ratings take comfort from the financial strength of the Siddiqsons group and strong support from the sponsors.
The ratings are dependent upon holding sustained operations and continuity of improved margins. Successful and timely execution of planned CRC project is key to uphold ratings. The maintenance of coverages during expansion phase will be critical for the ratings. Continuity of anti-dumping duty is considered critical for the sustainability of the business risk profile of the Company.

About the Entity
Sidiqsons Tin Plate Limited was incorporated in 1996. It is listed on Pakistan Stock Exchange (PSX). The controlling stake is held by Rafi Family. The family directly holds ~44% shares, while 15.3% are indirectly held through Siddiqsons Limited. Around 9.3% shares are held Arcelor Packaging international. The remaining shareholding is held by individuals and financial institutions. The principal business activity of the Company is manufacturing and sale of tin plates, cans and other steel products. The registered office of the Company is in Karachi. The manufacturing facilities are located at Windhur, Balochistan and Malir, Karachi.

The control of the Company vests with Board of Directors, which comprises seven members including the Chief Executive Officer. There are two independent directors, three non-executive directors and two executive directors including CEO. All non-executive directors represent Rafi Family. The Chairman of the board is Mr. Tariq Rafi. Mr. Rafi is a seasoned business professional and carries a track record of successful business ventures.

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.