The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Azhar Corporation (Pvt.) Limited

Rating Type Entity
(30-Dec-22 )
(30-Dec-21 )
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Pakistan's personal and homecare product market has shown an annual growth rate of ~2-3%. There is less gap in demand and supply position, as sufficient production capacities are available to cater in case of any unforeseen demand and/or exports. Over the years within homecare and laundry products, a gradual switch has been observed from soaps towards liquids and powdered detergents. The market for soap bars posts an annual dip of ~7-10%, whereas, the market for powder detergents posted an annual growth of ~10-12%.
The ratings reflect Azhar Corporation's diversified revenue stream and strong presence in the laundry soap segment with their established brand 'Gai Soap'. Being a market leader in this segment, the Company generates most of its revenue from local sales, while nominal exports are made to Afghanistan. Following the industry trend, the Company has a presence in the detergent market (Powder detergent - Gai Powerwash and Xtra Neat). The Company has presence in branded Vegetable Ghee/Edible Oil segment, with- Gai Banaspati and Gai Cooking Oil. The Company’s Oil/ Ghee business is in a challenging phase and portrays a fluctuating trend, impacting the overall performance. The topline is dominated by the laundry soap division, as the Company has maintained a strong network of dealers in the suburbs. Margins have maintained stability. However, borrowing costs remain significant owing to increasing interest rates. Financial profile of the Company remains stable owing to moderately leveraged capital structure; consisting of short-term debt only, obtained to finance the working capital requirement. The Company's coverage ratios remain adequate. Over the years, demonstrated support from sponsors bodes well for the ratings. The ratings are dependent on the management's ability to prudently manage its market share, while maintaining business margins. Given the economic slowdown faced by the economy nowadays trade receivables have also increased on the back of stringent market conditions which may negatively impact rating.
The ratings are dependent on the management's ability to prudently manage its market share, while maintaining business margins. Pressure on business volume and margins owing to the high input costs and market conditions may negatively impact the ratings.

About the Entity
Azhar Corporation (Pvt.) Limited was incorporated in 1979, and principally manufactures Personal, Homecare, and Edible Oil products at an installed capacity of 126,000MT/annum. These include Laundry Soap, Beauty Soap, Bar Soap, and Detergent Powders. The Company also manufactures Vegetable Ghee and Cooking Oil at an installed capacity of 45,000MT/annum. Ownership of the Company vests equally with the families of Mr. Azhar Iqbal and Mr. Hassan Munawwar (~ 50% each). The Board is dominated by the Sponsoring family, and includes Mr. Azhar Iqbal and Mr. Hassan Munawwar only. They are assisted by a team of professionals

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.