The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Ghani Gases Limited

Rating Type Entity
(20-Jun-18 )
(01-Nov-17 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings recognize the company's significant position in the industrial and medical gases sector. The industry largely possesses oligopolistic structure: benefiting the players. With an expected growth in demand due to increase in industrialization and uptick in economic activity, GGL is pursuing an expansive strategy to become the market leader. The company's revenue has improved on account of higher volumes as the company has successfully managed to add new customers in health sector, merchandise market and industrial undertakings. Although the company's financial structure is leveraged, incremental cash flows and, in turn, coverages are adequate and hence adequate financial profile. Given the group's expansionary stance, sustained vigilance and support from sponsors is essential. Timely completion of GGL-III and subsequently smooth functioning is important. 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, remain important, wherein any significant dilution would have negative implications for the ratings. Whereas, company's market share and in turn sustained margins would support ratings.

About the Entity
Ghani Gases Limited (GGL), 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 of the company is held by public sector companies and financial institutions (25%) and general public (24%). The company's product slate consists of liquid oxygen, liquid nitrogen, liquid argon, and calcium carbide. The company overall capacity is 220TPD combining both GGL I (Lahore) and GGL II (Karachi), whereas GGL III (Lahore) with an installed capacity of ~ 100TPD is planned to be operational in Jan19.

GGL's nine member board is majorly represented by members of sponsoring family (six), two independent director and an executive. Mr. Masroor Ahmad Khan is the Chairman of the BoD. Mr. Atique Ahmad Khan holds the office of CEO and Hafiz Farooq Ahmad is Managing Director. The Chairman oversees administrative and financial issues of the company═ż marketing and sales are in the domain of CEO and technical production & operations in the purview of Managing Director.

About the Instrument
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 proposed 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 May18, Sukuk has an outstanding balance of PKR 1,029mln and will be fully mature in Feb23

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.