Analyst
Muhammad Fahad Iqbal
fahad.iqbal@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Assigns Initial Entity Ratings to Tufail Chemical & Surfactants (Pvt.) Limited.
Rating Type | Entity | |
Current (31-Dec-19 ) |
||
Action | Initial | |
Long Term | A- | |
Short Term | A2 | |
Outlook | Stable | |
Rating Watch | - |
Tufail Chemical & Surfactants (Pvt.) Limited’s (the Company) ratings reflect adequate business profile of the Company, characterized by a relatively limited capacity and modest profitability. The Company is associated with Tufail Chemical Industries Limited and majority of its surfactants (LABSA and SLES) sales are channeled through Tufail Chemical Industries Limited. Thus, the Company's sales remain a factor of overall demand and how it will be benefited at group level. Historically, dumping by various international players has squeezed the margins of the Company. Imposition of anti-dumping for five years on sulphonic acid imports from various countries, since May-17, has helped the Company in sustaining its profitability. The R&D is done at Group level which has helped the Company in commissioning new surfactants variants. This, alongside continuous BMR activities and experienced management team transpires into operational efficiencies, in turn, improved product profile and stable margins despite challenging environment. The demand for the Company's products is expected to remain intact with rising income and hygiene awareness. Meanwhile, the Company has modest financial risk profile, characterized by moderate leveraging, healthy coverages. The Company's finance its working capital needs through stort term borrowing leading to relatively limited cushion at trade assets level. The assigned ratings incorporates experienced management and the Company’s association with Tufail Group, leading surfactants manufacturer of Pakistan. Strengthening of governance framework is considered positive.
The ratings are dependent on the Company’s ability to sustain its margins, profitability and optimal capacity utilization along with efficiency in working capital cycle. Going forward, continuation of anti-dumping duty will remain critical. Any significant deterioration in margins and/or financial profile will impact the ratings.
About
the Entity
Tufail Chemical & Surfactants (Pvt.) Limited (The Company) was incorporated on September 02, 2009 as a private limited company. The Company is a family owned venture and ~99.6% of its shareholding is distributed among members of Tufail family. Out of which, Mr. Zubair Tufail holds 54%, Mr. Pervez Tufail owns 40% and Mr. Salman Tufail has 5.6% stake. The Company’s current capacity stands at 35,000 tones. The power requirement is met internally through gas fired generates.
The Company’s board comprises of four members with dominance of the Tufail family. Mr. Pervez Tanveer Tufail is the Chairman of the board and is also the CEO of the Company. All directors carry executive roles. Mr. Pervez Tanveer Tufail holds a graduate degree and carries with him over four decades of experience in the chemicals industry.