Sohail Ahmed Qureshi
PACRA Maintains Entity Ratings of Reliance Petrochem (Private) Limited
The ratings reflect adequate business profile of Reliance Petrochem (Pvt.) Limited. The Company is engaged in manufacturing and sale of different varieties of Polypropylene Bags and White-Oils. Recent increase in demand of consumer goods, urbanization and cost effectiveness has boded well for the industry. The industry is considered volatile when it comes to the procurement of raw materials (polymers and base-oils), as they are directly linked with the international prices of crude oil. Thus, the Company's top-line and margins have depicted fluctuations over recent years. However, Reliance Petrochem is focused on increasing the productivity and efficiency of its operations. The business is expected to grow further as the Company is in the phase of signing high-valued and long-term trading contracts with the foreign traders. The Company intends to increase share of exports in its revenue. Performance of the company during outbreak of Covid-19 and in associated lockdown period is expected to be improved due to the launch of new sanitizer segment. The profitability may come under pressure due to higher taxes as the Company enjoyed tax benefits for first five years of incorporation. Financial profile of the Company is considered adequate with intermediate leveraging. Coverages have improved recently on the back of better cash flows.
The ratings are dependent on sustaining sales revenue and margins, while managing financial risk at low level. Governance framework needs improvement as the Board is dominated by the Sponsoring family. At the same time, prudent management of inventories is considered important. Significant decline in margins and/or profitability, impacting cash flows and coverages, will have negative impact on ratings.
Reliance Petrochem Industries was incorporated in 2013 as a private limited company under the repealed Companies Ordinance 1984. The Sponsoring family is involved in trading business even before the partition of India and Pakistan. Trading of petrochemicals was started by Mr. Jai Kumar, son of Mr. Bool Chand. As the business grew, sponsors engaged in the manufacturing of polypropylene bags.
The board of Reliance Petrochem comprises of three brothers. Mr. Jawahar Lal is the CEO and also heads the board. Mr. Anil Parkash (Director) and Mr. Jai Kumar (Managing Director) are the other two board members. They collectively hold 100% ownership of the Company. The Company’s CEO – Mr. Jawahar Lal – has overall 21 years of experience in the chemical sector. He is responsible for operations of the Company and associated with the board since inception. He is supported by an able management team.