The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Assigns Initial Entity Ratings to Novapack (Pvt.) Limited

Rating Type Entity
(30-Dec-22 )
Action Initial
Long Term BBB-
Short Term A3
Outlook Stable
Rating Watch -

Novapack (Pvt.) Limited (“the Company” or “Novapack”) ratings reflect an emerging business profile in the industrial packaging industry. The Company manufactures and sells different types of polyethylene rolls and bags and serves a wide range of industries like food & beverages, textile, automotive, and personal care. The company has an in-house sales & marketing department headed by a team of professionals. The product demand is high due to the growing population, urbanization, and the E-Commerce revolution. Novapack is owned and managed by close family members and they are seasoned professionals. There is room for improvements in the governance structure which currently lacks board committees and independent oversight. The Management has a well understanding of business and operational efficiencies being monitored through budgets, forecasts, and projections. During FY22 revenues depicted ~6% growth and stood at PKR 816mln, where net margins showed some dilution and recorded at ~4% (FY:21 ~6%). As a part of the diversification strategy, the Company has started a new business segment of assembling and sale of customized/specialized LED lighting under the brand name “NOVO”. The financial risk profile of the Company is considered good, with sufficient cashflows, coverages, and an adequate working capital cycle. The operations of the Company are managed through internally generated cash flows and short-term borrowings. Capital structure is leveraged and mainly comprised of short-term borrowings. The Company has availed TERF facility for expansion in production capacity.
The ratings are dependent on the firm’s ability to sustain its position amidst changing business environment and management’s ability to run the operations of the Company optimally. With the upcoming growth in the firm’s business & volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.

About the Entity
Novapack (Pvt.) Limited is a private limited company established in 2014. It is family owned and operated business with shareholding equally divided among four members (25% each). Mr. Abdul Wasay is the CEO of the company. Mr. Abdul Rafy is CFO & Company Secretary and Mr. Adil is the executive director.

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.