PACRA Upgrades the Entity Ratings of Azhar Corporation (Pvt.) Limited

The ratings upgrade for Azhar Corporation Pvt. Ltd. is underpinned by the Company's ability to sustain its financial performance and operational efficiency, despite operating in a competitive market environment characterized by numerous small-scale and cottage industry businesses. The Company's flagship brand is Gai, which is well known, especially in the rural and sub urban areas. The brand strength is pivotal to the ratings. The rating of Azhar Corporation Pvt. Ltd. is also driven by the Company's diversified revenue streams and strong market position in the laundry soap segment, anchored by the established 'Gai Soap' brand. The Company's revenue is primarily generated from domestic sales. Its product portfolio encompasses a range of detergent products, including Gai Power Wash and Xtra Neat powder detergents, as well as branded vegetable ghee and edible oil products such as Gai Banaspati, Cooking Oil, and Hoor Banaspati, Cooking Oil. The Company has expanded its product offerings to include Hoor beauty soap. According to the Pakistan Soap Manufacturers Association, in soap industry of Pakistan, there are approximately 600 units, approximately 115 units in the organized sector, and 450 factories in the unorganized sector despite navigating a challenging market landscape marked by intense price competition and dynamic consumer demands. The Company has effectively utilized its market position by launching new products and streamlining operations, achieving a 13% growth rate while sustaining its revenue and profit margins. The soap segment, which accounts for 78% of total revenue, demonstrated robust growth of 14%, while the edible oil segment, contributing 22% to total revenue, experienced a commendable 11% growth rate in FY24. This success is attributable, in part, to the strategic partnership with its robust distribution network. While navigating a challenging financial landscape with higher interest rates, the Company has implemented effective cost-control measures and operational efficiencies to safeguard its net profit margins. The Company is managing its working capital primarily through short-term borrowings, which account for 97% of its total borrowings. The efficient management of accounts receivable and accounts payable, characterized by timely collections from debtors and prompt payments to suppliers, significantly improves the working capital cycle. The Company's financial flexibility is enhanced by the timely support provided by its sponsor, ensuring adequate liquidity during periods of stress. The Company's forward-looking projections indicate stable operations and consistent revenue streams. However, there is a risk of market share decline in the future due to intense competition in the soup and detergent markets.
The ratings are dependent on the management's ability to prudently manage its market share, while maintaining business margins. Pressure on business volume and margins owing to the high input cost and a perfect competitive market may negatively impact the ratings.

About the Entity
Azhar Corporation (Pvt.) Limited was incorporated in 1979, and principally manufactures Personal, Homecare, and Edible Oil products at an installed capacity of 126,000MT/annum. These include Laundry Soap, Beauty Soap, and Detergent Powders. The Company also manufactures Vegetable Ghee and Cooking Oil at an installed capacity of 45,000MT/annum. Ownership of the Company vests equally with the families of Mr. Azhar Iqbal and Mr. Hassan Munawwar (~ 50% each). The Board is dominated by the Sponsoring family, and includes Mr. Azhar Iqbal and Mr. Hassan Munawwar, Ms. Khadija Azhar and Ms. Zainab Azhar. They are assisted by a team of professionals.