PACRA Assigns Preliminary rating to Ghani Chemical Industries Limited | PP Sukuk | PKR 800mln | TBI

The ratings recognize Ghani Chemical Industries Limited's (GCIL) leading and prominent position in the industrial and medical gases sector in terms of production capacity. The industry largely possesses an oligopolistic structure, benefiting the players. The Company has maintained adequate margins and profitability. The Company has generated a topline of ~PKR 2.48bln during 6MFY23 (6MFY22: ~PKR 2.7bln). The top line of the Company decreased by ~8% during 6MFY23. Ghani Chemical Industries Limited generated a bottom line of ~PKR 254mln during 6MFY23 (6MFY22: ~PKR 559mln). The bottom line of the Company decreased by ~55% during 6MFY23. The decline in profitability is attributable to higher cost of production and finance cost. The merger of G3 Technologies Limited (G-Tech) with and into Ghani Chemical Industries Limited is completed along with business assets. The Company has completed (a) the capacity expansions of the new plant and (b) the stock exchange listing during CY22. All three plants remained operational at optimum capacity utilization. GCIL planned to finance the capital expenditure requirement at Hattar industrial estate through a mix of equity, bank borrowing, and Sukuk. The rating of the instrument captures the strength of the security structure, primarily from the DPA mechanism. A debt payment account (DPA) will be maintained with the agent bank. One-third of the upcoming quarterly installment will be built up each month in such a way that the entire upcoming installment will be deposited in DPA 30 days before the installment payment date. This is an added feature, which has been considered in the revised rating of the instrument.

About the Entity
Ghani Chemical Industries Limited is a listed, public concern, incorporated as a private limited company in Nov-15 and subsequently converted to a listed public company. The Company is a subsidiary (~58.53%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family. The remaining shareholding lies in Ghani Products (Pvt.) Ltd.

About the Instrument
Ghani Chemical Industries Limited (“GICL” or the “Company”) is in the process of issue a Rated, Privately Placed & Secured, Islamic Certificates ("Sukuk") of PKR 800 mln in April-May 2023. The Sukuk will be secured by way of a first parri passu charge over the present and future plant & machinery of the Company inclusive of a 25% margin. A DPA will be maintained with the agent bank. One-third of the upcoming quarterly installment will be built up each month in such a way that the entire upcoming installment will be deposited in DPA 30 days before the installment payment date. The proceeds of the instrument will be utilized to finance the capital expenditure requirement at Hattar industrial estate. The tenor of the instrument will be 6 years from the date of issue including 2 year grace period. Profit will be paid quarterly in arrears on the outstanding principal amount at the rate of 3MK+1.25%. Principal repayment will be paid in 16 equal quarterly installments amounting PKR 50mln each till the maturity of the instrument on Apr'29. The instrument also contains the prepayment of facility amount which can be made only after the expiry of Twelve (12) months from the date of last disbursement under the facility, with fifteen (15) days prior written notice to the facility agent, in the denomination PKR 50mln or multiple thereof.