The Pakistan Credit Rating Agency Limited
Press Release


Kanwal Ejaz

Applicable Criteria

Related Research

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 Assigns Preliminary Ratings to Ghani Chemical Industries Limited- Islamic Commercial Paper ("ICP") of PKR 1,000mln

Rating Type Debt Instrument
(24-Jun-21 )
Action Preliminary
Long Term A
Short Term A1
Outlook Stable
Rating Watch -

The ratings recognize Ghani Chemical Industries Limited's (GCIL) leading and prominent position in the industrial and medical gases sector in terms of production capacity. The industry largely possesses an oligopolistic structure, benefiting the players. Demand of medical gases in health sector has significantly escalated during third wave of Covid-19 and is expected to sustain in short to medium term. On the other side manufacturing and construction industry has comprehended recovery which led to improved demand for industrial gases. The company was able to capitalize growth from (a) Underutilized free capacity, which was available as a result of 3rd 110TPD plant expansion (b) price rationalization of medical and industrial gases also witnessed from financial performance of the company recorded in 9MFY21. Company’s margins, coverages and working capital cycle showed improvement at all levels. Cash flows of the Company also posted a healthy growth. All three plants are operational with higher capacity utilization. Capacity expansions are underway and currently the Company is setting up its fourth 105TPD 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. GCIL also intends to setup the largest 275TPD plant in KPK in future as well. 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 expansions with new plants and 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 Company is contemplating to issue a short term commercial paper, as bridge finance, for another expansion project. This will be repaid through internal sources and/or other equity sources.
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, public concern, incorporated as a private limited company in Nov-15 and subsequently converted to public status. In Jul-19, as part of the Scheme of Compromises, Arrangement and Reconstruction 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 (~74.45%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family (~52%). The remaining shareholding lies Ghani Products (Pvt.) Ltd. 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 a management team with extensive experience and a diversified skillset.

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.