The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Packages Limited

Rating Type Entity
(16-Jun-22 )
(16-Jun-21 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Packages Ltd.'s (‘Packages’ or ‘the Company’) holding company character and robust profile built over the years as the flagship Company of Ali Group. The sponsor's business acumen and strong connections have remained beneficial. Post internal restructuring, the manufacturing business has been transferred to Packages Convertors Ltd., a wholly owned subsidiary, thus enabling Packages to act purely as a holding company. Packages holds a sizable investment book ~ PKR 48bln (as at Mar-22), comprising core, strategic and non-strategic investments. Packages Convertors has prominent market presence in its operational segments - Packaging (Flexible Packaging & Folding Cartons) and Consumer Products (Tissue). Dividend from Bulleh Shah Packaging is improving over time. Packages Mall, a real estate venture, is operating as envisioned. OmyaPack (Pvt.) Ltd, a JV with an international player for calcium carbonate, is still evolving. Packages Limited now has a total shareholding of 69.26% in Tri-Pack Films Ltd after acquiring 19.33% stake from Mitsubishi Corporation on February 15, 2022. StarchPack (Pvt.) Ltd, a newly formed wholly owned subsidiary with the primary business to manufacture and distribute corn-based starch, is in the initial gestation phase.
Topline of the Company has improved supported by dividend income emanating from Bulleh Shah Packaging. Moreover, profits remain sizable after transferring liabilities to Packages Convertors. This is expected to remain stable as the envisaged dividend flow from core investments is being realized. In the current inflationary pressure and high interest rates environment, Packages and its investments ( that operate in the FMCG sector) are expected to be marginally impacted. However, the management is confident to hold its market share along with improved performance, going forward. On the financial profile side, low leveraging and strong coverages provide comfort to the Company's ratings. Strong business acumen of Sponsors adds further cushion.
The ratings are dependent upon building sustainable dividend stream from maturing investments. Maintaining low leveraged capital structure and strong coverages remain critical.

About the Entity
Packages Ltd. was established in 1957 as a Joint Venture between Ali Group of Pakistan and Akerlund & Rausing of Sweden, to convert paper and paperboard into packaging for the consumer industry. It started commercial production of tissue paper in 1982. Packages is listed on the PSX since 1965. The Company is classified as an investment holding company. Over the years, the Company has continued to enhance its investment book to meet the growing demand in the FMCG sector.
Ali Group holds 46.5% shares of the Company through Directors and individual family members and its corporates, with IGI Holdings Ltd. owning the prime share. Financial institutions and Modarabas own 10% and 9% stakes, respectively. While 29% of shares are held by the general public. Syed Babar Ali provides guidance while Mr. Syed Hyder Ali heads the Company as its CEO. He is supported by a team of experienced professionals.

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.