PACRA Maintains Entity Ratings of Ghani Gases Ltd | Sukuk | Feb-17
|Rating Type||Debt Instrument|
The ratings recognize Ghani Gases’ prominent position in the industrial and medical gases sector. The industry largely possesses oligopolistic structure, benefiting the players. Growth in demand due to increase in industrialization and uptick in economic activity has led the company's revenue to improve. Driven by volumetric growth, the company has successfully managed to add new customers in health sector, merchandise market and industrial undertakings. With expectation of continued growth in demand, Ghani Gases is pursuing an expansive strategy to become the market leader by setting up its new plant, GGL-III. Timely completion and subsequently smooth functioning of the new plant is important. Financial risk profile of the company is stretched on account of recent rise in short-term borrowing, diminishing free cashflows and coverages, though the company remains moderately leveraged. Given the group's expansionary stance, sustained vigilance and support from sponsors is essential. The sponsoring family has demonstrated support to the company in the past.
The ratings are dependent on the company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk particularly debt coverages, remains important, wherein any significant dilution would have negative implications for the ratings. Sustained market share and, in turn, better margins would support ratings.
Ghani Gases Limited, incorporated in 2007 and listed on PSX, is engaged in the manufacturing, sale, and trading of medical and industrial gases and chemicals. The CEO and directors along with their families collectively own majority (51%) shares of the company. The remaining shareholding lies with public sector companies and financial institutions (14%) and general public (35%). The company's product slate consists of liquid oxygen, liquid nitrogen, liquid argon, and calcium carbide. Overall capacity stands at 220TPD combining both plants: GGL I (Lahore) and GGL II (Karachi), whereas GGL III (Lahore) with an installed capacity of ~120TPD is planned to be operational in July19.
Ghani Gases’ nine member board is majorly represented by members of sponsoring family, two independent directors and an executive. Mr. Masroor Ahmad Khan is the Chairman of the BoD. Going forward, the company is undertaking a scheme of arrangement which aims to restructure Ghani Gases into a holding company while the company’s manufacturing undertaking will be transferred to subsidiary: Ghani Chemical Industries Limited.
The company has issued a rated, privately placed and secured Sukuk amounting to PKR 1,300mln on 3rd February 2017. The Sukuk is having a maturity of six years. Principal repayment had started since May17, while remaining would be repaid in consecutive quarterly installments. The profit repayments are being made on a quarterly basis on the outstanding principal amount on a floating rate of 3M-KIBOR plus 100bps. The Sukuk issue is secured by way of a first parri passu charge over present and future fixed asset of the company inclusive of a 20% margin. As of Nov18, Sukuk has an outstanding balance of ~PKR 921mln and will be fully mature in Feb23.