PACRA Assigns Initial rating to Ismail Industries Limited | PPSTS | PKR 6bln | June 24

Based on mass marketing, the confectionery, biscuits and snack industry in Pakistan is highly price sensitive. Pakistan's large retail base is highly fragmented and dominated by small retailers. However, a major transformation of establishing large retail chains has been observed, particularly in urban centers. The ratings reflect Ismail Industries Limited’s (‘the Company’) diversified revenue stream generating from the well established brands Candyland, Bisconni, Snackcity, Ismail Nutrition, Ghiza Flour and Astro Films. The ratings further draw comfort from IIL's strong organizational structure designed to oversee its subsidiaries' strategic direction. Strong governance framework of the Company lends further support. Ismail Industries Limited have investments in its subsidiaries and associates. The company holds 78.53% shares of Hudson Pharma (Pvt) Limited. The company also holds 75% of Ismail Resin (Pvt) Limited that deals with manufacturing of PET resin. The associates of Ismail Industries include Bank of Khyber, Plastiflex Films (Pvt) Limited and Innovita Nutrition (Pvt) Limited. During the 9MFY24, the company achieved a topline of ~PKR 86bln (9MFY23: PKR 64bln) out of which ~44% of this revenue came from exports, driven primarily by international projects. Gross margins improved slightly to 22% in 9MFY24, compared to 21% in 9MFY23. Net profit also increased to ~PKR 5.2bln from (9MFY23: PKR 4.3bln). However, the net profit margin decreased to 6% from 7% due to higher finance costs.
The ratings are dependent on continued revenue growth and maintenance of margins. Prudent management of expansion and investment-related debt in order to meet financial obligations is important. Stringent controls on the Company's debt levels remain imperative for sustaining the ratings. Brand reputation through customer satisfaction remains a crucial parameter for the rating.

About the Entity
Ismail Industries Limited, incorporated in 1988, is a public listed Company. The Company’s major business lines are confectionery, snacks, biscuits, nutritional food and plastic films.
Major shareholding of the Company lies with Ismail Family (~99%), through Mr. Muhammad Ismail (~16%), Ms. Almas Maqsood, wife of Mr. Maqsood Ismail, (~30%), Mr. Miftah Ismail (~31%), Mr. Ahmed Muhammad (~15%) and associates (~0.7%). Mr. Muhammad Ismail is the Chairman of the Board. The overall control of the Company vests with seven Board members. The CEO, Mr. Munsarim Saifullah, is supported by an experienced management team.

About the Instrument
The Company has issued a rated, a rated, privately placed, unsecured short-term Sukuk or Islamic commercial paper of PKR 6bln on June 10, 2024 to finance the working capital requirement of the Company. The instrument will be having a tenor of 6 months. Profit is being paid monthly in arrears on the outstanding principal amount at the rate of 1MK+25bps. The principal payment would be made in a bullet payment at the time of maturity. Currently, there are two instruments in issuance, amounting PKR 6bln and PKR 4bln respectively. The later is completing its redemption process. A new short-term Sukuk amounting PKR 5bln is being issued. After the aforementioned redemption and new issuance, the total outstanding amount will be PKR 11bln.