Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Debt Instrument Rating of Berger Paints Pakistan Limited | PP Sukuk | Sep -21
Rating Type | Debt Instrument | |
Current (24-May-24 ) |
Previous (24-Nov-23 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect Berger Paints Pakistan Limited's (“Berger” or the “Company) established position and strong brand in the premium domestic paint market of the country. The Company has a strong governance framework and an experienced management team leading to effective controls. The ratings also find comfort in Berger's well-diversified revenue stream with retail, non-retail, and allied business segments. The paint industry remained competitive and pressurized due to the presence of a large unorganized sector and ongoing global inflation, supply chain disruption, and a hike in policy rates coupled with rupee deprecation. The Company’s non-retail business, dominated by automotive paints, also faces pressure due to the recent decline in passenger car sales.
During 3MCY24, revenues depicted marginal growth stood at PKR 6,370mln (3MCY23: PKR 5,322mln). The company's profit after tax stood at PKR 201.13mln during 3MCY24 (3MCY23: PKR 143.6mln). The equity of the Company as of Mar'24 was PKR 3,387mln (Jun'23: PKR 3,195mln). The financial risk profile of the Company is characterized by moderate coverages and a stretched working capital cycle which the management believes that, it's an industry-wide norm. Berger had issued the privately placed sukuk to facilitate the working capital management of the Company. The leveraging during 3MCY24 was 29.7% as compared to 3MCY23 35.5%
Generating operating cashflows along with maintaining an efficient supply chain and prudent working capital management is important. Compliance with the covenants of the term sheet especially maintenance of the DSRA and DPA account would remain crucial.
About
the Entity
Berger was initially incorporated in 1950 as a Private Limited Company and subsequently converted into a public listed company in 1974. In 1991, Slotrapid Limited, a company incorporated in the British Virgin Islands, acquired control of Berger Paints Pakistan by purchasing 52.02% shares from Jenson & Nicholson Limited. The control of the Company vests with an 08-member Board of Directors including Mr. Maqbool H. H. Rahimtoola (Minority Shareholder & Chairman). There are 04 independent directors and 03 non-executive directors. The CEO-Dr. Mahmood Ahmad has 26 years of experience and is supported by a professional management team.
About
the Instrument
Berger issued Unlisted, Privately Placed & Secured PKR 500mln Sukuk at a rate of 3MK+1.50% P.A and tenor of up to 4years inclusive of 1year grace period commencing from the facility's effective date: 26-sept-2022. The first rental payment fell due at end of first quarter from issue date. However, the Issue is expected to be redeemed in 12 equal consecutive quarterly buyout units starting from 21st month of issue date. The Sukuk are secured by 1st Pari Passu charge by way of mortgage over company's Land & Building measuring 94.7 Kanal located at Multan road district Lahore with a 25% margin. Berger is maintaining PKR 50 million in Debt Service Reserve Account (DSRA), throughout the tenure of the Sukuk. The account is maintained with Bank Islami. Additionally, DPA is expected to be maintained with Accounts Bank with 1/3 of quarterly payments in each month .Further, lien on Company's operating Account, Debt Payment Account (DPA), and DSRA is maintained with Accounts Bank in favor of Investment agent.