PACRA Assigns Preliminary Ratings to Ismail Industries Limited - PPSTS-6 - PKR 8bln

The assigned ratings of Ismail Industries Limited (“IIL” or “the Company”) reflect its entrenched market position, resilient operational dynamics, and demonstrated capacity to diversify and innovate within its core business segments. During 3MFY26, ~88% of total revenue emanated from domestic operations, while exports accounted for the remaining ~12%. (FY25: ~66%, ~34%, respectively). The Company operates through two primary divisions: Food and Plastics, contributing ~85% and ~15% to topline, respectively. The rise in domestic sales is mainly attributable to the World Food Programme’s (WFP) initiative, which strategically reallocated a portion of export-oriented food products towards local consumption. The ratings incorporate IIL’s sustained business growth, underpinned by prudent financial management and sound liquidity buffers. The Company’s expanding footprint is primarily driven by higher volumetric sales in the domestic market and the successful rollout of new product lines. During the year, IIL infused 100% equity amounting to USD 10 million into a newly incorporated foreign subsidiary, Bisconni Middle East Manufacturing LLC, based in Abu Dhabi, UAE. This strategic investment aims to capture the rising demand within the middle east region’s biscuit segment. IIL’s diversified brand portfolio comprising Candyland, Bisconni, SnackCity, Ismail Nutrition, Ghiza Flour, and Astro Films continue to anchor revenue stability. The assigned ratings further draw comfort from IIL’s strong organizational structure, effective oversight mechanisms, and sound governance practices, collectively strengthening its credit profile. The Company maintains notable strategic investments in subsidiaries and associates, reflecting its commitment to diversification and vertical integration. These include a ~78.53% stake in Hudson Pharma (Pvt.) Limited, engaged in the production of inhalation solutions, ophthalmic drops, intravenous infusions, and topical formulations, and a ~75% holding in Ismail Resin (Pvt.) Limited, enabling vertical integration through PET resin manufacturing. Financially during 3MFY26, IIL reported a marginal contraction in gross margins to ~18.8% (FY25: ~20.8%), primarily due to higher sales tax. This pressure also translated to the bottom line, with net margins declining to ~4.2% (~FY25: ~5.5%). Recognizing the inherent challenges in the confectionery sector, such as evolving consumer preferences and a heightened focus on health-conscious consumption, the Company continues to emphasize product innovation, including the launch of premium variants aimed at strengthening margin sustainability.
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. Principal activities of the Company are manufacturing and trading of sugar confectionery items, biscuits, nutritional products, flour, cast polypropylene films under the brands of 'CandyLand', 'Bisconni', 'SnackCity', 'Ismail Nutrition', Ghiza', 'Super Cereal' and 'Astro Films' respectively.

About the Instrument
The Company is in the process of issuing a rated, privately placed, unsecured short-term Sukuk (PPSTS-6) amounting to PKR 8.0 billion, including a PKR 3.0 billion green shoe option, in February 2026. The proceeds will be utilized to finance the Company’s working capital requirements. PPSTS-6 will have a tenor of six months and will mature in August 2026. The Sukuk will carry a profit rate of 3MK plus spread, with both profit and principal payable at maturity.