The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Updates the Entity Ratings of H. Sheikh Noor-ud-Din & Sons (Private) Limited | Outlook Stable | Removed Rating Watch

Rating Type Entity
(18-Jan-23 )
(18-Jan-22 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Negative
Rating Watch - Yes

H. Sheikh Noor-ud-Din & Sons (Private) Limited (“The Company” or “HSNDS”) is a family-owned manufacturing and production arm of NRS Relief which is primarily engaged in the production and sale of a unique range of innovative relief products (tents, tarpaulins, canvas, mosquito nets, and other items) for humanitarian organizations. Recently, the ownership of the Company has gone through some structural changes now moving towards stabilization. The family transaction is expected to be executed at the end of 2023. The sponsors have strong industry-specific knowledge & expertise. The financial strength of the entity is considered adequate as apart from the relief industry, the sponsors are also involved in other businesses like; edible oil manufacturing, poultry and dairy products. The HSNDS has sponsors dominant board, which soon be squeezed into three brothers after the formal departure of Mr. Farhan Sarwar. The governance of the Company is considered adequate and requires augmentation. Sales of the industry are majorly made to relief organizations worldwide. Recent, flooding in Pakistan has also created an opportunity for the relief products providers to penetrate/ grow their volumes in the local market. Tents are their prime product followed by Tarpaulin and Mosquito nets. During FY22, the top line of the Company has shown a 26.0% growth mainly on the back of timely bidding for new contracts of international relief agencies after the resolution of ownership conflict. Recent flooding in Pakistan to penetrate and grow locally and Ukraine Russia war created avenues for the company to induce further growth in its revenues. The Company’s margin remains stable on the back of the Company’s ability to pass on inflationary impact and some momentum towards the economy of scale. The management of the Company is actively following its financial projections to achieve its future top-line targets. The financial risk profile of the Company is considered adequate as sponsors and management of the Company are mindful of unloading debt from its balance sheet and fund capital requirements mainly through internally generated cashflows. This is considered imperative for the ratings. The working capital management of the Company is stretched which depicts industry norms. The cash flows are coverages of the Company adequate. The ratings incorporate the Company’s long-term association with international donor agencies such as UN, UNHCR, UNICEF, Red Cross etc. Adequate support from sponsors and other group businesses remains a key rating factor. PACRA has removed "Rating Watch" and “Negative Outlook” on the ratings on account of improvement in the topline and bottom-line growth of the Company, timely bidding of orders and start getting contracts from international relief agencies, unloading of debt from the Company Balance sheet and payment through internally generated cashflows and expected stability in Ownership structure.
The successful formal transition of ownership and new governance structure, of sustainable growth in sales volumes and stability in margins, remains critical for ratings. Any deterioration in coverages and cash flows of the Company remains critical for the ratings.

About the Entity
H. Sheikh Noor-ud-Din & Sons (Private) Limited (The Company) was incorporated in 1979 as a private limited company in Lahore, Pakistan. Overall control rests with a three-member board. Mr. Farhaj Sarwar is the CEO of the Company and is accompanied by his two brothers and 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.