The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Maintains Entity Ratings of Gharibwal Cement Limited

Rating Type Entity
(01-Apr-22 )
(02-Apr-21 )
Action Maintain Upgrade
Long Term A A
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Gharibwal Cement's strength in its key markets. The company operates a plant located in Chakwal District with annual cement capacity of 2.1mln Tons. The company focuses on geographies closer to the plant location; Gujranwala division remained company’s home market. The Cement sector’s dispatches have recorded splendid growth and surged by 21% in FY21 as demand in the domestic market accelerated. The industry’s future demand outlook is positive, in view of the infrastructure projects in the pipeline. The company managed to record an increase of 7% in total dispatches for FY21. As a result, Net Sales of the company improved to PKR 12.11bln during FY21 (FY20: 8.71bln) showing a massive 40% increase. Similar trend was noticed in the first quarter ended Sept 2021 (1QFY22: PKR 3.18bln, 1QFY21: PKR 2.16bln). The overall margins of the company also improved as compared to FY20 owing to better retention prices. Going forward, with the rising trend in the coal and fuel prices, the operational costs are expected to increase as this constitutes a major component of the production cost. In order to curtail this effect, the Company has completed the construction and operations of Waste Heat Recovery (WHR) plant that generates electricity up to 12MW from waste hot gases of the process and 8MW from coal fired system. Considering the rising demand, the company is planning to expand its current capacity by 10,000 TPD in order to maintain their market presence in the industry. The financial profile remains adequate as long-term leveraging expected to increase if expansion would be financed with debt mix. The ratings draw comfort from sponsor families, having prime focus of the company.
Industry's dynamics encompassing rising local demand is seen as an opportunity for the cement manufacturers. The ratings are dependent on upholding the company’s business vis-à-vis financial risk profile in the current economic scenario.

About the Entity
Gharibwal Cement Limited, operating with cement capacity of 2.1mln tpa. The company is majority-owned by Mr. Tousif Peracha (~54%), founder of Gharibwal Group, followed by Rafique Family (~33%). Gharibwal Group has interests in glass manufacturing, lubricants, and real estate projects locally as well as abroad and shipping and truck manufacturing in Nigeria. The Company’s seven-member BoD, including one independent director. Peracha family has four representatives, including the CEO. Two other directors represent Rafique Family on board. Mr. Tousif Peracha, the CEO, is supported by a team of experienced individuals with long association with the company.

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.