The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Azmat Shaheen

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Debt Instrument Rating of Berger Paints Pakistan Limited | PP Sukuk | Sep -21

Rating Type Debt Instrument
(26-May-23 )
(27-May-22 )
Action Maintain Initial
Long Term A A
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings reflect Berger Paints Pakistan Limited's (“Berger” or the “Company) established position and strong brand in the premium domestic paint market of the country. The Company has strong governance framework and an experienced management team leading to effective controls. The ratings also find comfort in Berger's well diversified revenue stream with retail, non-retail and allied business segments. The paint industry remained competitive and pressurized due to presence of large unorganized sector and ongoing global inflation, supply chain disruption, hike in policy rates coupled with rupee deprecation. The Company’s non-retail business, dominated by automotive paints, also faces pressure due to recent decline in passengers car sale.
During 9MFY23, financial performance of the Company was slightly distressed, however revenues depicted marginal growth to stand at PKR 5.3bln (9MFY22: PKR 5.2bln). The profit after tax of the Company stood at PKR 144mln during 9MFY23 (9MFY22: PKR 156mln). The equity of the Company as of Mar'23 was PKR 2,405mln (FY22: PKR 2,346mln). The financial risk profile of the Company is characterized by moderate coverages and stretched working capital cycle which is an industry wide norm. Berger had issued the privately placed sukuk to facilitate working capital management of the Company.
The ratings are dependent upon the management’s ability to sustain upheld profits and margins while improving its financial performance. Generating operating cashflows along with maintaining efficient supply chain and prudent working capital management is important.

About the Entity
Berger was initially incorporated in 1950 as a Private Limited Company and subsequently converted into a public listed company in 1974. In 1991, Slotrapid Limited, a company incorporated in British Virgin Islands, acquired control of Berger Paints Pakistan by purchasing 52.02% shares from Jenson & Nicholson Limited. The control of the Company vests with 08-member Board of Directors including Mr. Maqbool H. H. Rahimtoola (Minority Shareholder & Chairman). There are 04 independent directors and 03 non-executive directors. The CEO-Dr. Mahmood Ahmad has 26years of experience and is supported by a professional management team.

About the Instrument
Berger issued Unlisted, Privately Placed & Secured PKR 500mln Sukuk at a rate of 3MK+1.50% p.a and tenor of up to 4years inclusive of 1year grace period commencing from the facility's effective date. The first profit/Rental payment fell due at end of first quarter from issue date. However, the Issue will be redeemed in 12 equal consecutive quarterly buyout units starting from 21st month of issue date. The Sukuk are secured by 1st Pari Passu charge by way of mortgage over company's Land & Building measuring 94.7 Kanal located at Multan road district Lahore with a 25% margin. Berger is maintaining PKR 50 million in Debt Service Reserve Account (DSRA), throughout the tenure of the Sukuk. The account is maintained with Bank Islami. Further, lien on Company's operating Account, Debt Payment Account (DPA), and DSRA is maintained with Accounts Bank. Additionally, DPA is maintained with Accounts Bank with 1/3 of quarterly payments in each month.

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.