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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Dec-20

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@pacra.com
+92-42-35869504
www.pacra.com

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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 Maintains Entity Ratings of Tufail Chemical & Surfactants (Pvt.) Limited.

Rating Type Entity
Current
(30-Dec-20)
Previous
(31-Dec-19)
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Tufail Chemical & Surfactants (Pvt.) Limited’s (the Company) ratings reflect adequate business profile of the Company, characterized by a relatively limited capacity and modest profitability. The Company is associated with Tufail Chemical Industries Limited and majority of its surfactants (LABSA and SLES) sales are channelled through Tufail Chemical Industries Limited. Thus, the Company's sales remain a factor of overall demand and how it will be benefited at group level. Historically, dumping by various international players has squeezed the margins of the Company. Imposition of anti-dumping for five years on sulphonic acid imports from various countries, since May-17, has helped the Company in sustaining its profitability. The R&D is done at Group level which has helped the Company in commissioning new surfactants variants. This, alongside continuous BMR activities and experienced management team transpires into operational efficiencies, in turn, improved product profile and stable margins despite challenging environment. The demand for the Company's products is expected to remain intact with rising income and hygiene awareness. Meanwhile, the Company has modest financial risk profile, characterized by moderate leveraging, healthy coverages. The Company finances its working capital needs through short term borrowing leading to relatively limited cushion at trade assets level. The assigned ratings incorporates experienced management and the Company’s association with Tufail Group, leading surfactants manufacturer of Pakistan. Strengthening of governance framework will be helpful to the Company.
COVID-19 has impacted the industries all over the world but the Chemical industry sustained really well due to the chemical products being used in this pandemic period. Additionally, growing demand for consumer health products (soaps, etc.) amidst COVID- 19 outbreak has benefited the Company as general hygiene and cleanliness becomes paramount, resulting in increased demand for chemical-based products.
The ratings are dependent on the Company’s ability to sustain its margins, profitability and optimal capacity utilization along with efficiency in working capital cycle. Going forward, continuation of anti-dumping duty will remain critical. Any significant deterioration in margins and/or financial profile will impact the ratings.

About the Entity
Tufail Chemical & Surfactants (Pvt.) Limited (The Company) was incorporated on September 02, 2009 as a private limited company. The Company is a family owned venture and ~99.6% of its shareholding is distributed among members of Tufail family. Out of which, Mr. Zubair Tufail along with his family members holds 51% and Mr. Pervez Tufail along with his family members owns 48.6%%. The Company’s current capacity stands at 35,000 tones. The power requirement is met internally through gas fired generates.
The Company’s board comprises of four members with dominance of the Tufail family. Mr. Pervez Tufail is the Chairman of the board and is also the CEO of the Company. All directors carry executive roles. Mr. Pervez Tufail holds a graduate degree and carries with him over four decades of experience in the chemicals industry.

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.