PACRA Assigns Initial Ratings to Ismail Industries Limited - PPSTS-4 - PKR 8bln - Feb-25

Ismail Industries Limited ("IIL" or "the Company") is strategically evolving into a structure holding diverse revenue streams, which is the key consideration for assigned rating. The Company's total revenue is derived from local and export sales. ~55% of the revenue is generated from domestic sales, while ~45% is attributed to export sales. The rating is primarily driven by IIL’s expanding operations, fueled by increased sales volumes, along with the successful introduction of new products. IIL is further expanding its footprint in the UAE by establishing a new Bisconni subsidiary in Abu Dhabi, with an investment of up to $10mln. The diversity in the revenue stems from well-established brands such as Candyland, Bisconni, Snackcity, Ismail Nutrition, Ghiza Flour, and Astro Films. IIL's strong organizational structure and governance framework provides effective oversight of its strategic investments, further strengthening its credit profile. IIL holds significant investments in its subsidiaries and associates. The Company owns ~78.53% holding of Hudson Pharma (Pvt) Limited and ~75% holding of Ismail Resin (Pvt) Limited. IIL's associates include Bank of Khyber, Plastiflex Films (Pvt) Limited, and Innovita Nutrition (Pvt) Limited. IIL’s ratings reflect its improved financial performance, driven by enhanced working capital management and stable cash flows. Strong operational performance, including efficient inventory management, along with IIL’s ability to maintain profitability despite rising financial costs, has contributed to this positive outcome. IIL recognizes confectionery industry risks, such as shifting consumer preferences. To mitigate these, the Company prioritizes product innovation, including premium offerings, to enhance margins by targeting high-end consumers. The Company is currently fulfilling its working capital requirements through the issuance of Privately Placed Subordinated Term Sukuks (PPSTS). In this regard, the Company has issued a new PPSTS amounting PKR 8bln during Feb, 2025, as a replacement for the previously issued PPSTS of PKR 5bln, which has been redeemed on February 24, 2025.
The ratings are dependent on sustained revenue growth, margin maintenance, and prudent financial management. Prioritizing brand reputation and disciplined debt management are crucial for maintaining the ratings.

About the Entity
Ismail Industries Limited, incorporated in 1988, is a public listed Company. IIL’s major business lines are confectionery, snacks, biscuits, nutritional food, and plastic films. Major shareholding of the Company lies with the Ismail Family (~99%), through Mr. Muhammad Ismail (~16%), Ms. Almas Maqsood, wife of Mr. Maqsood Ismail, (~30%), Mr. Miftah Ismail (~31%), Mr. Ahmed Muhammad (~15%) and associates (~0.7%). The CEO, Mr. Munsarim Saifullah, is supported by an experienced management team.

About the Instrument
The Company has issued a rated, privately placed, unsecured short-term Sukuk or Islamic commercial paper Ismail Industries Limited | PPSTS | PKR 8bln | Feb 25 of PKR 8bln (inclusive of Rs 3bln green shoe option) in Feb, 2025, to finance the working capital requirement of the Company. The tenor of the instrument will be 6 months. PPSTS-4 will carry a profit rate of 3MK+10bps. Profit and principal will be realized at the time of maturity.