The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Ghani Chemical Industries Limited

Rating Type Entity
(14-Jun-22 )
(14-Jun-21 )
Action Maintain Upgrade
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

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 demand for medical gases in health sector has now stabilized as the Covid-19 pandemic is eased off. On the other side, the large-scale manufacturing index comprehended recovery which led to improved demand for industrial gases. The board of directors of GCIL has decided to merge G3 Technologies Limited (formerly Service Fabric Limited) with/into GCIL for ultimate PSX listing which is a positive sign and will add comfort to the assigned ratings. During 9MFY21 the top-line of the Company showed ~10% growth and margins also showed improvement at all levels. All three plants remained operational at optimum capacity utilization. GCIL’s fourth 105TPD dedicated plant became operational and started to cater to the demand of renowned industrial customer and would play a pivotal role in top-line and bottom-line growth. GCIL also intends to set up the largest 275TPD plant in KPK in the future as well. Going forward the Company is expected to receive benefits from (a) rising demand from the industrial segment which will be translated into better financial performance (b) Capacity expansions with a new plant with sustained existing capacity utilization (c) reduce reliance on borrowings from financial institutions with rationalized leveraging policy (d) stock exchange listing to capitalize future growth.
The ratings are dependent on the Company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further deterioration would have negative implications for the ratings. Consistent growth in market share and improved margins would support ratings.

About the Entity
Ghani Chemical Industries Limited is an unlisted, public concern, incorporated as a private limited company in Nov-15 and subsequently converted to public status. In Jul-19, as part of the Scheme of Compromises, Arrangement, and Reconstruction was undertaken by the Ghani Global Group of Companies, the manufacturing undertaking of Ghani Global Holdings Limited (formerly “Ghani Gases Limited”), along with all assets and liabilities, was transferred to Ghani Chemicals Industries Limited. The Company is a subsidiary (~69.90%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family (~51.62%). The remaining shareholding lies in Ghani Products (Pvt.) Ltd. Ghani Chemicals is engaged in the manufacturing, sale, and trading of medical and industrial gases and chemicals. The Company's overall capacity stands at ~435 TPD while its product slate consists of Liquid Oxygen, Liquid Nitrogen, Liquid Argon, and Calcium Carbide. Members of sponsoring family majorly represent Ghani Chemicals’ four-member board. Mr. Masroor Ahmad Khan is the Chairman of the board while Mr. Hafiz Farooq Ahmad holds the office of CEO. They are assisted by a management team with extensive experience and a diversified skillset.

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.