Muhammad Azmat Shaheen
PACRA Assigns Initial Entity Ratings to Bikiya Industries Private Limited
Bikiya Industries Private Limited ('BIPL' or the 'Company') is family owned business with majority stake lying with Mr. Muhammad Saleem Bikiya. BIPL is among the top five manufacturer of tissue paper. Over the period, the Company has established its brand name "TUX" amongst the leading tissue providers in Pakistan. The production of the segment is directly linked with the demand of food products and consumer goods. considering the higher demand, the utilization level has remained on higher side. Going forward, considering optimum utilization level and further strengthening of market share, the Company is planning to expand its operations. Currently, the average market share of the Company stood at ~5% in the tissue paper industry. The CEO/owner has an extensive knowledge of industry trends and tissue business with overall 30 years of experience. While the Management has a well understanding of business and operational efficiencies. The governance structure is considered weak due to the absence of a formal board structure, board committees, and independent oversight, furthermore external auditors are not QCR rated and denote room for improvement. The Company structure is not complex making management of operations an easy and timely task with one head office and two production offices.
The financial risk profile of the Company is considered adequate. The Company and its brand are still under development phase, there are higher operating expenses since past four fiscal years resulting in negative after tax profits. Revenue for the Company during 9MFY22 stood at PKR 561mln (FY21: PKR 510mln) with net profit margin of -3.3% (FY21: -9.1%). The net working capital days fall on higher side, depicting higher utilization of running finance resultantly, the leveraging of the company remained on higher side during the period under review. The profitability of the Company would remain under pressure considering developmental expenses and higher finance cost. However, financial commitments from sponsors exist in times of need.
The ratings are dependent on the Company’s ability to sustain its position amidst changing business environment and management’s ability to run the operations of the Company optimally. With the upcoming growth in firm’s business & volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.
BIPL was established in 2014 with a share capital of PKR 50mln. Mr. Saleem Bikiya has 80% shareholding while his sons Mr. Usman Bikiya and Mr. Muhammad Bilal has 10% shareholding each. BIPL deals in five products namely i) Pop-up Tissue Box, ii) Toilet Roll, iii) Pop-up Mini Tissue, iv) Hand Towel and v) Party Pack having a widespread customer base. The Company sells to northern, central and southern regions of Pakistan. About 58% of customer base of BIPL is located in southern region with respect to geographical concentration.