The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns Initial Entity Ratings to DIC Pakistan Limited

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

DIC Pakistan Limited (“DIC” or ‘The Company’) ratings reflect the strong sponsor's profile, established market position, and adequate financial profile of the Company. The assigned rating takes into account the good governance framework, strong control environment, and qualified and experienced management team. DIC is predominately manufacturing the different types of printing inks. As per management representation the Company enjoys the largest market share in the overall Printing ink industry. Production of the segment is directly linked with the demand of food products and consumer goods. During CY21, the utilization level was on the lower side ~63% as compared to CY20 ~73% due to capacity enhancements made during the year.
The assigned ratings also incorporate the consistent growth in sales and higher margins. During CY21, the top line of the Company has increased by ~20%, the major contribution is made by Rotogravure ink ~54% followed by Flexographic Ink-Water-Based ~18%. The profit after tax of the Company has significantly increased by ~60% to PKR 683mln (CY20: PKR 427mln) mainly due to high growth in the food and consumer goods sector and effective marketing strategies. Resultantly, the free cash flows have also improved by 1.5 times as compared to last year. The group synergy of DIC corporation has helped the Company in reaping the benefits of high demand and effective inventory management. On the financial profile side, moderately leveraged capital structure i.e. ~33% (CY20: ~35%) would remain imperative to the ratings where the short-term debt is related to working capital management. Total borrowing of the company includes ~84.5% short term borrowing. Furthermore, comfort for the assigned rating has also been drawn from Parent Company’s resolute commitment to supporting the Company in case of any financial needs. Good FCFO provides a cushion for the finance cost and debt repayment. The Company has been managing its energy requirements by using a mix of solar energy and supply from WAPDA. Moreover, the sponsor's business acumen and vast experience in the industry bodes 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 also imperative for the ratings. Any significant decrease in margins and coverages will impact the ratings.

About the Entity
DIC Pakistan Limited was incorporated as a public limited company in July 1994 as a Joint Venture between DIC Asia Pacific Limited and Packages Limited by holding 45% and 55% shares respectively. Syeda Henna Babar Ali is the chairperson of the board and Mr. Ismail Hussain Naqvi is the CEO of the Company. Mr. Ismail joined DIC as Chief Operating Officer in June 2019 and took over as CEO from January 1, 2021. He has more than 24 years of diversified professional experience in various positions in different companies. 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.