PACRA Assigns Initial rating to Ismail Industries Limited - PPSTS - PKR 5bln - Aug-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 reflect IIL's robust organizational structure, which is adeptly designed to provide strategic oversight of its subsidiaries. The company's strong governance framework provides additional support to its credit profile. 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. Also, IIL is preparing to establish a new Bisconni subsidiary in the UAE. The Company reported a robust revenue growth, achieving PKR 108,887mln (FY23: PKR 88,906mln), a 22.5% increase from the prior year driven by enhanced operational efficiency and favorable pricing. Out of this topline, 45% revenue was derived from exports, largely supported by contributions from international projects. Gross margins of the Company stood at 22% during FY24 (FY23: 21%). Increase in finance costs has exerted pressure on the company's net profit, leading to a slight decline compared to the prior year (FY24: PKR 6,132mln, FY23: PKR 6,382mln). In Aug 24, the company successfully completed the issuance of a new PPSTS amounting PKR 5bln, following the redemption of its previously issued PKR 4bln PPSTS. This latest issuance brings the company's total funding raised through debt instruments to PKR 11 billion.
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 successfully issued a rated, privately placed, unsecured short-term Sukuk or Islamic commercial paper of PKR 5bln on Aug 20, 2024 to finance the working capital requirements of the Company. The instrument will be having a tenor of 6 months. Profit will be paid monthly in arrears on the outstanding principal amount at the rate of 1MK+15bps. The principal payment would be made in a bullet payment at the time of maturity.