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The Pakistan Credit Rating Agency Limited
Press Release

Date
03-Feb-21

Analyst
Timnat Thomas
timnat.thomas@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 Rating of Ghani Chemical Industries Limited's Sukuk | Feb-17

Rating Type Debt Instrument
Current
(03-Feb-21)
Previous
(07-Feb-20)
Action Maintain Maintain
Long Term A- A-
Short Term - -
Outlook Stable Negative
Rating Watch - Yes

The ratings recognize Ghani Chemical Industries Limited's (Ghani Chemicals) prominent position in the industrial and medical gases sector. The industry largely possesses an oligopolistic structure, benefiting the players. The ratings takes comfort from Ghani Chemical’s strong market position in industrial and medical gases. Industry as whole has comprehended recovery in 1HFY21 which led to improved demand for industrial and medical gases, also witnessed from financial performance of the company recorded in 1QFY21. Company’s margins, coverages and working capital cycle showed improvement at all levels. Cash flows of the Company also posted a healthy growth. Third 110TPD plant is fully operational and now the Company is ready to setup its fourth dedicated plant which will cater the need of a renowned big industrial customer through a long term sale contract and would play a vital role towards top-line and bottom-line growth. Going forward the Company is expected to receive benefits from (a) rising demand from industrial and medical gases which will be translated into better financial performance and are evident in future financial projections (b) Capacity expansion with dedicated new plant with enhancement of current % utilization to ensure maximum production (c) reduce reliance towards borrowings from financial institutions with rationalize leveraging policy (d) stock exchange listing to capitalize future growth.
The ratings are dependent on the Company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further deterioration would have negative implications for the ratings. Consistent growth in market share and improved margins would support ratings.

About the Entity
Ghani Chemical Industries Limited is an unlisted and public concern. In Jul-19, as part of the Scheme of Compromises, Arrangement, and Reconstruction was undertaken by the Ghani Global Group of Companies, the manufacturing undertaking of Ghani Global Holdings Limited (formerly “Ghani Gases Limited”), along with all assets and liabilities, was transferred to Ghani Chemicals Industries Limited. The Company is a subsidiary (~99%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family (~56%). Ghani Chemicals is engaged in the manufacturing, sale, and trading of medical and industrial gases and chemicals. The Company's overall capacity stands at ~330 TPD while its product slate consists of Liquid Oxygen, Liquid Nitrogen, Liquid Argon, and Calcium Carbide. Ghani Chemicals’ four-member board is majorly represented by members of sponsoring family: Mr. Masroor Ahmad Khan is the Chairman of the BoD while Mr. Hafiz Farooq Ahmad holds the office of CEO. They are assisted by an experienced management team.

About the Instrument
The Company has issued a rated, privately placed, and secured Sukuk amounting to PKR 1,300mln on 3rd February 2017. The Sukuk has a maturity of six years. Principal repayment started on May 2017 with consecutive quarterly installments. The profit repayments are being made on a quarterly basis on the outstanding principal amount at a floating rate of 3M-KIBOR plus 100bps. The Sukuk issue is secured by way of a first parri passu charge over the present and future fixed assets of the Company inclusive of a 20% margin. Under the Regulator’s Relief Package amid COVID-19, the Company has availed deferment of the outstanding principal amount of PKR 650mln, which will now be paid from May 2021 onward. The Sukuk will be fully matured in Feb 2024.

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.