The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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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 has a market share of 4% in the north region with annual cement capacity of 2.1mln tons. The company focuses on geographies closer to the plant location; Gujranwala division remained company’s home market. During FY19, industry dynamics especially for cement players operating in north region have shifted significantly on account of fluctuating cement prices, increase in FED on coal import and depreciation in Pak Rupee against other currencies. Along with these factors, slow local demand has affected the company's sales whereby cement dispatch declined to 1.1mln tons in 9MFY19 (9MFY18: 1.4mln tons). Owing to current muted demand, the company decided to delay its capacity enhancement plan by two years. The company’s business profile remained adequate on account of aforementioned factors while margins and profitability witnessed decline. However, margins remained better when compared with other small players of the industry. The financial risk matrix is expected to improve as leveraging is expected to remain at same level owing to delay in expansion; coverage improved YoY. The ratings draw comfort from sponsor families, having prime focus of the company.
The ratings are dependent on upholding of the company’s business vis-à-vis financial risk profile in current economic scenario. Industry’s dynamics encompassing expected challenges of supply glut, substantial decline in local demand or deterioration in cement prices will negatively affect the ratings.

About the Entity
Gharibwal Cement Lim ited, operating with cement capacity of 2.1mln tpa (market share: 4%). 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 one independent director. Peracha family has four representatives, including CEO. Two other directors represent Rafique 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.