The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns Initial Entity Ratings to Bulleh Shah Packaging (Private) Limited

Rating Type Entity
(05-Sep-22 )
Action Initial
Long Term AA-
Short Term A1
Outlook Stable
Rating Watch -

Bulleh Shah Packaging (Private) Limited ‘BSP’ or ‘The Company’) ratings reflect the strong sponsor's profile, established market position, and adequate financial profile of the Company. The Company is a wholly-owned subsidiary of Packages Limited. The assigned rating takes into account the good governance framework, strong control environment, and qualified and experienced management team. BSP is predominately manufacturing i) Corrugated boxes and ii) Paper & Paper boards. The Company’s market share in the overall industry (Paper & Board) is almost ~15%. Liquid packing board (falls under the purview of paper & Board) - the Company is the sole manufacturer in this segment, and Corrugated board – BSP is the major supplier and holds 16% market share. The production utilization of the Company is directly linked with foods and consumer products. During CY21, the utilization level remained on the higher side Corrugator ~98% and paper and board 87%. In order to cater to growing demand and capture market share of imported paperboard BSP has performed BMR on its paper and board mill to enhance the capacity utilization further.
The assigned ratings also incorporate the consistent growth in sales and higher margins. During CY21, the top line of the Company has increased by 26%, the major contribution is made by corrugated boxes 35% followed by liquid packaging board 18%. The profit after tax of the Company has increased by 19%. Resultantly, the cash flows have also been improved by 20%. Assessment of financial risk profile incorporates the outstanding insurance claim receivable amounting PKR 3.4bln, due to fire incidence in Feb'22. On the other side, leverage indicators continue to remain elevated on account of higher utilization of short-term and long-term borrowings for funding working capital requirements and performing BMR work on its paper and board mill respectively. Going forward, the impact of higher finance costs & overheads on profitability is expected to be offset by an improvement in margins and an increase in the topline. However, the Company has been managing its energy requirements by using a mix of Biomass, Gas, and supply from WAPDA. Going forward, short-term borrowing is expected to be lowered considering the receipt of an insurance claim. Moreover, The sponsor's business acumen and strong connections bode well for the rating.
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 imperative for the ratings. Any significant decrease in margins and coverages will impact the ratings.

About the Entity
Bulleh Shah Packaging (Private) Limited was incorporated as a private limited company on September 16, 2005, and is involved in the commercial production of Corrugated boxes and Paper & Paper boards. The primary purpose of the project was the backward integration of the packaging business of Packages Limited. Mr. Syed Haider Ali is the chairman of the board and Mr. Asghar Abbas is the CEO of the Company has joined Packages Limited in 1998 and developed strategic and functional level expertise in the packaging business over the years. He has more than 24 years of diversified professional experience in various positions in different companies of the Packages Group. Mr. Asghar Abbas has been associated with the BSP since 2017 and in the CEO position since 2020. A team of qualified individuals associates him.

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.