The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Jamal Pipes Industries (Pvt.) Limited

Rating Type Entity
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Jamal Pipes Industries (Pvt.) Limited, a family operated business, is engaged in manufacturing of pipes and allied products since four decades. The Company's product slate includes black line pipes, galvanized line pipes, variety of poles (octaconical poles, tubular poles and street light poles) and Guardrails. Around 50% is contribution from pipes whilst from remaining 40% arises from poles. Diversification in product slate is considered positive while further strengthening of revenue from each products would reduce concentration and add cushion to business risk profile. The company has been catering to the demand of corporate projects since last many years and enjoys association with corporate clients. The ratings reflect an adequate market presence of the company in a highly fragmented industry. Over the last few years, the company's business risk profile has strengthened on account of better volumetric sales. During 9MFY20, company’s net sales recorded around PKR 2.1bln where net profitability stood at PKR 104mln. Margins and coverage witnessed improvement attributable to decline in raw material prices (zinc price has direct correlation to petroleum prices). However, lock down imposed due to COVID-19 outbreak for around two months of 4QFY20 will impact the profitability for FY20; still expected to stay in good range. The management eying to sustain capacity utilisation at current level for upcoming months. The financial risk revolves around higher short-term borrowings to support the working capital - inherent need of the business model followed by the company. The Company has an explicit policy of not raising any long term debt. Going forward, the Company’s debt levels are expected to remain range bound. The ratings incorporate four decades long association of sponsor family with the same industry. Covid-19 has posed challenges to almost all segments of the economy, worldwide and domestically, where negative implications are being observed on steel sector. The ramifications would continue to unfold, warranting vigilance and timely actions where needed.
The ratings are dependent upon the company’s ability to sustain its business profile in the wake of challenges in current diluted economic scenario. Herein, effective and prudent management of financial risk indicators remain important.

About the Entity
Jamal Pipes Industries (Pvt.) Limited was incorporated in 1981. It is engaged in manufacturing of pipes, tubes, tubular poles and guardrails which are used in different government and private projects. The company is wholly owned by the sponsors family with equal shareholdings by Mr. Mian Farooq Ahmed and Mr. Mian Shakeel Ahmed and their families. The overall control of Company vests with two members' board of directors. Mr. Farooq Ahmed - the Chief Executive and Mr. Shakeel Ahmed - Executive Director are equipped with necessary technical skills to manage and oversee the business.

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.