PACRA assigns Initial Ratings to Neelum Oil and Ghee Industries (Pvt.) Limited

The ratings reflect Neelum Oil & Ghee Industries (Pvt.) Limited's ("the Company") association with Waheed Group of Companies ("the Group"). The Group has established a leading position in the edible oil and ghee sector, comprising its specific markets. There are five principal operating companies in this group; Waheed Hafeez Ghee Industries (Pvt.) Ltd., Khadija Edible Oil Refinery (Pvt.) Ltd., Neelum Oil & Ghee Industries (Pvt.) Ltd., AK Oil and Ghee Industry (Pvt) Ltd. and Lal Oil & Ghee Mills (Pvt.) Ltd. Furthermore, the Group benefits from a substantial combined production capacity exceeding ~850,000mln tons per annum for vegetable ghee and edible oil. This provides ability to meet large-scale market requirements and ensures operational efficiency. The Company also benefits from the growing brand equity of its flagship products (Fauji Supreme, Islamabad, Perlli, Phool, Zeenat). The ratings incorporate the extensive and diverse experience of the Company's sponsors across sectors, including CNG equipment & stations, industrial fats, electrolytic tinplate sheets, hospitality, construction, and real estate development. The group has recently ventured into olive farming and acquired land of more than 1000 acres to support and promote local agricultural development. The absence of formally established board committees indicates an opportunity to further strengthen governance frameworks and enhance specialized oversight mechanisms. Furthermore, the existence of a centralized finance function that manages all Group companies under a unified framework enhances financial oversight and provides additional comfort for the assigned rating.
As a newly established entity, the Company has exhibited consistent revenue growth (FY24: PKR 32bln, FY23: PKR 30bln, FY22: PKR 1.1bln). Its strategic positioning in the northern region to enhance regional sales coverage has been a key driver of this upward trajectory. The Company demonstrates a notable strengthening in its debt service coverage metrics. This positive development is underpinned by its prudent financial policy, characterized by a limited reliance on external debt financing, thereby enhancing its ability to meet its debt obligations. Furthermore, the Company's leverage profile has exhibited a positive trend, primarily attributable to a deliberate expansion of its equity base, resulting in a lower proportion of debt relative to equity. The Company has experienced a deterioration in its working capital cycle, indicating inefficiencies in operational liquidity management. The Company maintains a conservative capital structure, reflected in its improved leverage position. Notably, the entirety of the Company's borrowings comprises short-term obligations, indicating a cautious approach to debt utilization. Sponsors support provides comfort to the ratings.
The ratings are dependent on the management's ability to maintain its growing business volumes while sustaining margins and profitability. Prudent management of working capital and maintaining coverages is critical. Brand reputation and customer retention support the ratings.

About the Entity
Neelum Oil & Ghee Industries (Pvt.) Limited (the 'Company') was incorporated in 2019 under the Companies Act, 2017, as a Private Limited Company. The Company is primarily engaged in the production and sale of refined, branded cooking oil and ghee. Its manufacturing facility is located in Mirpur, Azad Kashmir, with an installed annual production capacity of 108,000 MT. The Company’s ownership is divided as follows: Awais Karni holds 65.68%, Faad Waheed holds 17.07%, Hamad Waheed holds 17.25%, and Javed Iqbal Chaudhary holds 0.00017%. The CEO, Mr. Awais Karni, is supported by a team of experienced professionals.