The Pakistan Credit Rating Agency Limited
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Maryam Arshad

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PACRA Maintains Entity Ratings of Welcon Chemicals (Pvt.) Limited

Rating Type Entity
(31-Mar-22 )
(26-Aug-21 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

Welcon Chemicals (Pvt.) Ltd’s ratings are reflective of the Company’s burgeoning business operations, in conjunction with its escalating profitability. The revenue stream of the Company is bolstered by its broad product base, which ranges from pesticides to seeds and fertilizers. While the raw materials for pesticides are mostly imported from China and the UK, the raw materials for fertilizers are produced and processed locally. Moreover, to further reinforce its revenue stream, the Company has incorporated biofertilizers in the product portfolio. Biofertilizers, a less expensive, locally produced substitute for exorbitant urea and DAP fertilizers, are now gaining increasing popularity in the local market. Fortuitously for the Company, the new product line is expected to increase revenues monumentally, as the demand for biofertilizers is also increaing exonentially in the local market. Further, the sale of seeds is also a major source of revenue for the Company. The agriculture sector of Pakistan is indispensable to the country’s economic growth, food security, poverty alleviation and employment generation. Welcon, being a part of the industry, has immense opportunities to further augment revenues and expand operations. Crops, in general, are prone to sporadic locust and pest attacks, in addition to being vulnerable to natural calamities and changes in climate. Therefore, the product base of Welcon remains primely relevant to the needs of the indigenous farming community. Although the Company experienced a significant deterioration in its margins, as the Pandemic’19 cast deleterious impacts on the industry as a whole, the industry is now reviving and profits have picked pace. Augmented profitability (Net Profit Margin: FY21: 6.7%, FY20: 2.3%) and contracted net working capital (days) (Net Working Capital: FY21: -225 days, FY20: -130 days) for the latest quarter heralded an improved financial performance by Welcon.. The rating further takes comfort from the Company’s prompt decision making framework, in tandem with its effective control systems. Welcon markets its products through a dense dealer network.
The ratings are dependent upon an improvement in the business and financial profile of the Company. Any deterioration in the topline, margins or cashflows remain critical to the ratings. The Company’s sustained business performance in the currently stretched economic scenario remains vital to the ratings.

About the Entity
Welcon, a private limited Company, was incorporated in the year 1994. It is the pioneer Company of the AllahDin Group. There has been a recent shift in the ownership structure of the Company. The shareholding of the founding generation comprising Ch. Ifitikhar Nazir, the Group Chairman and CEO, and his brother Mr. Atta Ur Rehman has been transferred to their respective sons, while Mr. Zia Ur Rehman has retained his ownership in the Company. Welcon is now majorly owned by Mr. Zain Iftikhar (66.4%), followed by Mr. Zia Ur Rehman (26.5%) and Mr. Masood Ur Rehman (3.9%). Further, Mrs. Ghazala Asmat, the wife of Ch. Iftikhar, holds 3.2% the shareholding of the Company. The Board of Directors comprises two members. Ch. Zia Ur Rehman carries with him close to three decades of experience and has been on the Board since 1994. Mr. Zain Iftikhar Chaudhry, son of Ch. Iftikhar Nazir, is the CEO of the Company. He is a graduate in Financial Management Services, from York University, Toronto.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.