PACRA Maintains Entity Ratings of H. Sheikh Noor-ud-Din & Sons (Private) Limited - Rating Watch - Developing

H. Sheikh Noor-ud-Din & Sons (HSNDS), manufacturing arm of NRS International, is primarily engaged in manufacturing of relief and health items for international donor agencies. The rating incorporates the Company’s long term association with international donor agencies such as UNHCR, UNESCO, Red Cross and others as a qualified vendor. The Company manufactures Long Lasting Insecticidal Nets (LLIN) under brand name DAWAPlus®. Approved by World Health Organization, it is the second most used LLIN with over 40% market share in the world. LLIN represents a major share of revenues in the Company. In 9MFY19, due to ongoing ownership related changes, the Company did not bid for new contracts with international relief agencies, which led to proportionate decrease in revenue and overall profitability However, after recent settlement agreement among sponsors, the Company’s revenues are expected to improve. To cater the needs of volatile relief industry, HSDNS has to maintain higher inventory levels which in turn give rise to higher capital needs. Due to decrease in sales, inventory levels further increased and gave rise to working capital needs. This led to higher short term borrowings, impacting overall financial profile of the Company. However, with repayment of CAPEX related lease liabilities, overall leveraging remains moderate. The Company enjoys adequate debt coverages. Strong support from sponsors and other group businesses is a key rating factor.
Improving volumetric sales, profitability, prudent management of working capital and financial profile of the Company will be important. Meanwhile, successful transition and implementation of new shareholding structure, strengthening of governance framework and financial transparency for better oversight of strategic affairs is considered critical. Adherence to agreed upon financial matrices (Short term borrowing to Net working capital <70%, cash debt coverages of above 2.5x) will remain critical.

The ownership structure of the Company has been reorganized after the sponsors reached an agreement. PACRA has placed entity ratings of the Company on Rating Watch and continues to monitor the progress. The above mentioned process is expected to complete in near future and action will be taken accordingly.

About the Entity
H. Sheikh Noor-ud-Din & Sons (HSNDS) was incorporated in 1979 as a private limited company in Lahore, Pakistan. The Company is equally owned by four brothers and as per the recently signed restructuring agreement, the eldest of four brothers Mr. Farhan Sarwar will cash out his share in the Company. The agreement also clearly lays out a road map for any future division of the Company assets in case of a split. The Company manufactures Blankets, Tents, Plastic Items, Solar Lights and Long Lasting Insecticidal Nets.

Overall control will now rest with a three member board after the exit of Mr. Farhan Sarwar from the board by August 2019. Mr. Farhaj Sarwar will replace Mr. Farhan Sarwar as the Company’s CEO. He has over two decades of experience in relief industry. He will be assisted by his two brothers and an experienced management team.