PACRA Maintains Entity Ratings of Bikiya Industries Private Limited

Bikiya Industries Private Limited ('BIPL' or the 'Company') is a family-owned business with a majority stake lying with Mr. Muhammad Saleem Bikiya. BIPL is among the top five manufacturers of tissue paper. Over the period, the Company has established its brand name "TUX" amongst the leading tissue providers in Pakistan. The production of the segment is directly linked to the demand for food products and consumer goods. Considering the higher demand, the utilization level has remained on the higher side. Going forward, considering optimum utilization level and further strengthening of market share, the Company is planning to expand its operations. As per management representation, currently, the average market share of the Company stands at ~5% in the tissue paper industry. Mr. Muhammad Saleem Bikiya CEO/director of BIPL, embodies the pivotal figure in its operations, who brings over three decades of industry experience to the table. With only two members on the Board, BIPL's governance model is improving since last year performance with regards to board management meetings and decisions taken ability of the board in comparison to established corporations however room for improvement is present. Currently, board committees are not active since establishment of the committee took place 2 years back. Moreover, to ensure operational efficiency through the identification, assessment, and reporting of all types of risk arising out of the business operations, the Company has just started internal audit function that operates under the direct supervision of directors which does not commensurate the weak areas of the Company. Furthermore, external auditors are not QCR-rated and denote room for improvement. The management team demonstrates strong operational expertise and a keen understanding of industry trends. The financial risk profile of the Company is considered adequate. The Company and its brand are still in the development phase. In FY23, Bikiya Industries Private Limited achieved a topline of PKR 2,784ml, marking a modest increase of about ~12% compared to PKR 2,482ml in FY22 (FY21: PKR 510ml). Furthermore, the Company faced challenges with rising raw material costs due to inflation and exchange rate fluctuations but successfully managed to improve its profit margins by transferring it to the consumers. As a result, the gross profit margin rose from ~ 23.4% in FY22 to ~ 23.7% in FY23 (FY21: ~13.5%). This increase contributed to a high net profit margin of ~10.9% during FY22 & FY23 (FY21: ~9.1%). As a result of these improvements, the company achieved a bottom line of ~PKR 303mln in FY23, compared to ~PKR 269ml in FY22. The product demand is expected to come full circle once the macro-level fundamentals improve. A low leveraged capital structure of Bikiya Industries Private Limited provides comfort to the assigned ratings.
The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings.

About the Entity
BIPL was established in 2014 with a share capital of PKR 50mln. Mr. Saleem Bikiya has 80% shareholding while his sons Mr. Usman Bikiya and Mr. Muhammad Bilal has 10% shareholding each. BIPL deals in five products namely i) Pop-up Tissue Box, ii) Toilet Roll, iii) Pop-up Mini Tissue, iv) Hand Towel and v) Party Pack having a widespread customer base. The Company sells to northern, central and southern regions of Pakistan. About 58% of customer base of BIPL is located in southern region with respect to geographical concentration.