PACRA Maintains Debt Instrument Ratings of Berger Paints Pakistan Limited | PP Sukuk | Sep -21

Berger Paints Pakistan Limited (“Berger” or “the Company”) benefits from strong brand equity, a well-established market position, and a resilient business profile within Pakistan’s paint industry. The Company operates modern manufacturing facilities and maintains a diversified product portfolio across three key segments: Retail (decorative paints), Non-Retail (including powder, protective, and automotive coatings), and Allied Business (comprising road safety products, construction chemicals, and adhesives). In addition, Berger engages in toll manufacturing for Buxly Paints Limited, further strengthening its operational capacity and revenue base. The sector’s total output stood at ~2.4mln MT, reflecting a decline of ~20% compared to ~3.0mln MT in FY24. The Chemicals industry remains heavily reliant on imported raw materials, making it sensitive to external supply dynamics. In FY25, imports of chemical products slightly declined to ~PKR 1,522bln (FY24: ~PKR 1,549.8bln), accounting for ~7.6% of the country’s total import bill. The market structure remains fragmented, with unorganized players holding nearly ~50% share and competing primarily on price. The sector is highly raw material intensive, with imports contributing ~85% of COGS, exposing industry players to exchange rate volatility and rising input costs. Key challenges include intense price competition, macroeconomic pressures, and a gradual shift in demand toward eco-friendly and low-VOC coating solutions. The Company posted revenue of ~PKR 6,872mln during 9MFY26, marginally higher than ~PKR 6,760mln in 9MFY25, translating into a modest growth of ~1.65%. Profitability remained steady, supported by disciplined pricing strategies and efficient cost management. Oversight mechanisms and governance practices continue to be strong, contributing to effective risk control and smooth operations. The Company’s financial standing is considered adequate, underpinned by consistent cash flow generation, although liquidity remains constrained due to tight working capital management. The capital structure is moderately leveraged, with funding sourced through a combination of short-term and long-term borrowings.
The ratings are dependent upon the management’s ability to sustain the market operation amidst stiff competition. Generating operating cashflows along with maintaining an efficient supply chain and prudent working capital management is important.

About the Entity
Berger Paints Pakistan Limited was incorporated in 1950 as a Private Limited Company under the Companies Act, 1913 (now Companies Act, 2017) and became a publicly listed company in 1974. It is listed on the Pakistan Stock Exchange (PSX). In 1991, Slotrapid Limited (BVI) acquired a 52.02% shareholding from the Company’s former parent, Jenson & Nicholson Limited, thereby assuming control. Governance is overseen by an eight-member Board comprising four independent, three non-executive, and one executive director. The CEO, Dr. Mahmood Ahmad, a nominee of Slotrapid Limited, brings nearly 28 years of industry experience and is supported by a skilled and experienced management team.

About the Instrument
Berger issued an unlisted, privately placed, and secured Sukuk of PKR 500 million (“the Sukuk”) at a profit rate of 3MK + 1.50% per annum, with a four-year tenor and a one-year grace period commencing on September 26, 2022. Principal redemption is structured in 12 equal quarterly installments of ~PKR 41.7 million each, commencing 21 months after issuance. As of March 2026, PKR 416.7 million has been redeemed, with two remaining installments due by September 2026. The Sukuk is secured by a first pari-passu charge over 94.7 kanal of land and buildings in Lahore, with a 25% margin. Berger is required to maintain a Debt Service Reserve Account (DSRA) of PKR 50 million and a Debt Payment Account (DPA), funded through monthly deposits equivalent to one-third of the upcoming quarterly installment.