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The Pakistan Credit Rating Agency Limited
Press Release

Date
13-Sep-24

Analyst
Muhammad Atif Chaudhry
Atif.Chaudhry@pacra.com
+92-42-35869504
www.pacra.com

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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 maintains Entity Ratings of Zafa Pharmaceuticals (Pvt.) Limited

Rating Type Entity
Current
(13-Sep-24 )
Previous
(13-Sep-23 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Zafa Pharmaceuticals (Pvt.) Limited (the “Company”) is a leading domestic player that holds a prominent position within the local market. The Company specializes in the formulation development, manufacturing, testing, and marketing of a diverse portfolio of quality, cost-effective medicines. Notably, its manufacturing facilities are among the few dedicated sites for producing Beta-Lactam and Cephalosporin products. The Board of Directors comprises experienced professionals, and its size is considered well-suited for effective governance and oversight. Zafa Pharmaceuticals (Pvt.) Limited’s top five products include Folic Acid tablets, Famila Injection, Zodip tablets, Xynosine Nasal Spray, and Ciprofloxacin HCL. The Company commands a good market share within the folic acid market. The Company is dedicated to its vision of delivering high-quality healthcare products to the public at competitive prices, offering a value proposition that is notably more affordable compared to its competitors. Pakistan’s pharmaceutical sector is a mix of local and multinational companies, with local firms holding a substantial share of the market. Global inflation, high logistics costs, and massive PKR depreciation have impacted the pharma sector negatively. On the other hand, Pakistan’s pharmaceutical industry experienced a significant increase driven by the government's deregulation of drug prices for non-essential categories and a one-time price adjustment for 146 drugs in Feb 2024. In this context of industry-wide price adjustments, the Company’s revenue has increased by ~20% as compared with the previous period. The Company has grown and augmented its position and is seen fortifying its production capabilities and product range. In the coming years, some new products are also in the pipeline. Concurrently, the Company reported an enhancement in its profit margins, reflecting improved operational efficiency and financial performance. Additionally, the Company holds investments in its different subsidiaries. The Company’s capital structure is characterized by low leverage, with a debt-to-equity ratio of 30% during FY23 (FY22: 18%). The Company’s debt structure primarily consists majorly the short-term borrowings obtained for working capital management. Furthermore, the Company has outlined plans for future capital expenditures, which are expected to further impact its borrowing levels and coverage ratios.
The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative. Further improvement in governance structure remains important for the ratings.

About the Entity
Zafa Pharmaceutical Laboratories (Pvt.) Limited has been operating in Pakistan since 1973. The company's Board of Directors (BoD) comprises five experienced professionals. Mr. Jawad Amin Khan, the CEO and Managing Director, brings over 30 years of experience in the pharmaceutical and healthcare sectors. He holds an MBA in Management and Marketing, as well as a BS in Operational Management and International Business from Pakistan. In addition to his role at Zafa, Mr. Khan holds senior positions in other companies within the pharmaceutical and packaging industries. Zafa Pharmaceutical Laboratories (Pvt.) Limited is a family-owned business, with Mr. Jawad Amin Khan owning approximately 91% of the company. Other shareholders include the late Mohammad Amin Khan (3.7%), Mrs. Zafar Amin (3.7%), Mrs. Maria Jawad Khan (0.11%), Mrs. Saba Ahmed (1.34%), and the remaining shares are held by Mr. Mohammad Shah Mir Amin Khan.

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.