The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns Initial Entity Rating's to Popular Aseptic Packaging (Pvt.) Limited

Rating Type Entity
(23-Nov-22 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

Popular Aseptic Packaging (Pvt.) Limited (“the Company”) ratings reflect the strong sponsor's profile, growing market position, and adequate financial profile of the Company. The sponsor’s family has vast experience in packaging and engaged in this business since 2012. The Company is predominately manufacturing seven-layer aseptic packaging for the Popular Food and Juice. The demand for the product is derived mainly from the food industry. The raw material of the finished product is ~100% imported hence, exposed to exchange rate risk. As per management representation, the Company approximately holds 12% market share. The production utilization of the Company is directly linked with foods and consumer products. During FY22, the utilization level remained on the higher side at ~60% (FY21: ~52%). In order to cater the growing demand and capture market share, the Company has performed BMR on its seven-layer aseptic packaging plant to enhance the capacity utilization by approximately three times in FY22.
The internal audit department is operating under the direct supervision of directors. On the financial profile side, during FY22 ~98% topline of the Company is generated from the sales to its associated companies which shows the high captive buying and low level of credit risk. The Company has generated a topline of ~ PKR 3,402mln in FY22 as compared to ~PKR 3,001mln in FY21. In FY22, Popular Aseptic Packaging (Pvt.) Limited generated a humble bottom line of ~PKR 23mln (FY21: ~PKR -52mln). The main reason for the net loss in FY21 was a significant increase in finance costs and deferred tax expenses. Going forward, the Company is expecting healthy growth in sales volume which will ultimately be converted into profits and increased market share. While the equity of the Company stood at ~PKR 1,432mln at the end of FY22(FY21: ~PKR 1,410mln). 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, performing BMR work on its seven-layer aseptic packaging plant, and related party exposure. 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 top line.
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
Popular Aseptic Packaging (Pvt) Limited ‘The Company’) was incorporated as a private limited company in 2012, and began its operations with the commercial production of seven-layer aseptic packaging for dairy and beverages industry. The primary purpose of the project was the backward integration of the business of Popular Foods and Beverages. The Company’s manufacturing plant is located in Noori Abad, Jamshoro, Sindh. The Company is partly owned by family members by directly holding ~57% shares in the Company. Remaining ~43% shares are held by Popular Foods (Pvt.) Limited which is wholly owned by Popular group. Mr. Imamuddin Shouqeen, Chairman of the Board and CEO of the Company, has over 41 years of experience in business. He is also an elected member of Senate.

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.