The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Maintains Entity Ratings of Martin Dow Marker Limited

Rating Type Entity
(31-May-24 )
(02-Jun-23 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Martin Dow Marker Limited (herein referred to as "MDM" or the "Company") formerly known as Merck (Pvt.) Ltd is a notable name in the pharmaceutical sector of Pakistan. The Company operates under the umbrella of Martin Dow Group, one of the largest locally owned pharmaceutical companies, which comprises three other companies, and constitutes well-known brands under its domain including; Rocephin, Concor, Evion & Glucophage, etc. The group is known for its high-end acquisitions and investments, denoting good financial strength. The local pharmaceutical industry size reached up to PKR 778bln in FY23 reflecting a YoY growth of ~10%, where Martin Dow Group is ranked at No.06 on a consolidated basis. Pakistan’s pharma industry is dominated by a few big players and top 10 companies hold ~49% of the market share. In recent years, the segment’s profitability remained under pressure due to the high cost of raw materials owing to PKR depreciation, as the sector imports ~85% of its APIs. Moreover, elevated interest rates have also diluted the bottom line of many players. Additionally, being price regulated the sector has limited ability to pass on the impact of cost escalations to the consumers. However, PKR stabilization and DRAP’s approval for price adjustments have provided the pharma industry with some breathing space in recent quarters. Over the years, MDM has developed a broad product base comprising products from segments including; diabetes, cardiology, analgesics, oncology, and vitamins, among others. The leadership flows from its distinctive ownership that vests in the hands of two reputable families coming with enriched professional backgrounds; Akhai & Marker family, while MDM is mainly governed by the descendant of the former, demonstrating profound business acumen. The Group is extremely conscious about quality standards and follows international best practices and guidelines. The assigned rating takes comfort in Martin Dow Group association and strategic alliances with renowned multinational groups such as Roche, Merck, Sanofi & Boehringer Ingelheim. From time to time the Company has invested in modernizing and integrating new technologies into its manufacturing facilities which are cGMP compliant. During the year under review, the company’s topline showed a growth of ~26% and clocked in at PKR 23,934mln. However, a significant dilution in the net profitability was observed on the back of ~145% increase in the finance costs of the company. The financial risk profile of the Company is considered adequate with reduced coverages, moderate cashflows, and a slightly stretched working capital cycle. The capital structure is leveraged, and the debt book is dominated by short-term borrowings to fund the working capital needs.
The ratings are dependent on the improvement of the profitability matrix and market share while retaining sufficient cash flows and coverages. However, adherence to maintaining its debt metrics at an adequate level is a prerequisite. Improvement in governance structure remains important for the ratings.

About the Entity
Martin Dow Marker Ltd is a subsidiary of Martin Dow Limited. Martin Dow Limited holds 75% shareholding while Marker Family holds the remaining 25%. Martin Dow Limited is owned by the Akhai Family, mainly Ali Akhai – son of late Mr. Jawed Akhai (the founding chairman of Martin Dow Group). Mr Ali Akhai is the chairman of the Board of Directors. MDM has a three-member board including the Chairman, Mr Javed Ghulam Muhammad the company's CEO, and Mr Syed Dawood – the independent 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.