The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Upgrades the Entity Rating of Platinum Steel Mill (Pvt.) Limited

Rating Type Entity
(16-Nov-23 )
(22-Nov-22 )
Action Upgrade Initial
Long Term BBB BBB-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Established in 2019 in the industrial sector of Port Qasim, Platinum Steel Mill (Pvt.) Limited (PSMPL or the Company) is a state of the art vertically integrated steel mill that incorporates the latest innovative technologies in manufacturing, efficiency and sustainability. Although the size is small, it is good to grow from. PSMPL produces high quality deformed steel rebar's and vertical integration of the steel plant gives it a competitive edge. During FY 23, being the first complete year in operation, the PSMPL posted topline of PKR 3.118 billion while maintaining its gross profit margins at comparative with the similar sized players in the industry. The Company has an equity base of PKR 1.224 billion. PSMPL is in process of installation of second furnace that will take the melting capacity to 100,000 tons per annum. The CAPEX is entirely financed by the sponsors themselves, and going forward there are no plans for any CAPEX related long term borrowings, thus keeping the leveraging at comfortable level. The Company has so far primarily relied on internally generated cash to meet its working capital requirements. However, on account of expansion, the Company may witness an increase in reliance on short-term borrowings. However, maintaining an optimal mix of capital structure remains important. Enhanced capacities are going to enable PSMPL, to explore untapped market and for this purpose management is focusing to improve its distribution channels. The impressive growth in topline, phased expansionary strategy and unwavering support of the Company’s sponsors led towards ratings upgrade. Group’s diversification into other businesses is also considered positive and ratings take comfort from the net worth of sponsors. Ratings also incorporate the essence of business’s backward supply chain integration.
The ratings are dependent upon the company’s ability to enhance its market share through volumetric growth as well as geographical diversification, effective and prudent management of financial risk indicators remains vital. PSMPL is a family owned and operated business exposing it to risks of same management and ownership. The overall governance framework is at very initial stages and needs improvement. Company is led by capable management. Business remains vulnerable to oscillations in macro-economic financial indicators.

About the Entity
Platinum Steel Mill (Private) Limited ("the Company") is a private limited company incorporated in Pakistan on 15 July 2019 under the Companies Act, 2017. The registered office of the Company is situated at C-49, K.D.A Scheme No.1, Main Karsaz Road. Gulshan Town, Karachi, Pakistan. The company operates with a melting capacity of 50,000M.T. and rerolling capacity of 175,000M.T., a further capacity enhancement plan is underway to increase the melting capacity to150,000M.T. The Company is wholly (100%) owned by Baghpati family. The overall control of board vests in two members, both of whom are from sponsoring family including the Chairman/CEO. Mr. Faisal Baghpati holds the position of the Chairman, as well as the office of Chief Executive Officer. His presence adds significant value to the board on account of his business experience, spanning over last 15 years.

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.