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

H. Sheikh Noor-ud-Din & Sons (Private) Limited (“The Company”) is a family-owned manufacturing arm of NRS Relief which is primarily engaged in the manufacturing of a unique range of innovative humanitarian relief products (tents, tarpaulins, canvas, mosquito nets, and other items) for international donor agencies. The need for these products arises due to natural calamities such as floods, wildfires and earthquakes or man-made crises. During 2020, changes in ownership and governance structure of the Company affected its performance; it did not bid for new contracts with international relief agencies for the supply of core relief items, which along with Global Pandemic Crises and subsequent lockdowns led to a fall in revenue while sabotaging profitability margins. For the last two years, the Company’s sales of Long-Lasting Insecticidal Nets (LLIN) – prominent business driver – reluctantly suffered as production facility remained closed. High debt levels put adverse shock on Company’s financial profile. Consequently, management decided to turn its major short-term borrowings to SBP’s export refinance scheme with an ultimate goal of reducing interest expenses. Going forward, the Company shall be pursuing a business philosophy; focusing low volume high margin transactions. Financial, Operational & Reputation risks shall exist for the Company in upcoming period. The ratings incorporate the Company’s long-term association with international donor agencies such as UN, UNHCR, UNICEF, Red Cross and others as a qualified vendor. Adequate support of sponsors and other group businesses remains a key rating factor. The ownership structure of the Company was reorganized after the sponsors reached a mutual agreement. PACRA has maintained "Rating Watch" and “Negative Outlook” on the ratings on account of observed decline in sales, issues pertaining to change in ownership structure and production from LLIN of the Company. PACRA will continue to closely monitor these developments. A rating action may be taken accordingly.
Successful transition of ownership, implementation of new governance structure, improvement in sales volumes through resumption of production of netting business, and prudent working capital management remain critical for ratings. Meanwhile, prudent financial discipline – particularly conservative capital structure and upright working capital management will be followed. Any reduction in sales and/or deterioration in coverages will impact the ratings negatively.

About the Entity
H. Sheikh Noor-ud-Din & Sons (Private) Limited (The Company) was incorporated in 1979 as a private limited company in Lahore, Pakistan. Initially, the Company was equally owned by four brothers, however as per recently signed restructuring agreement, the eldest of four brothers Mr. Farhan Sarwar’s stake in the Company has been bought in equal portions by remaining three brothers. The agreement also clearly lays out a road map for any future division of the Company’s assets in case of a split. The Company manufactures Blankets, Tents, Plastic Items, Solar Lights and Long-Lasting Insecticidal Nets.
Overall control rests with a three-member board after the exit of Mr. Farhan Sarwar from the board. In 2019, Mr. Farhaj Sarwar replaced Mr. Farhan Sarwar as the Company’s CEO and chairman. He has over two decades of experience in relief industry. He is assisted by his two brothers and an experienced management team.