PACRA Maintains Entity Ratings of Platinum Steel Mill (Pvt.) Limited

Platinum Steel Mill (Pvt.) Limited ("PSML" or "the Company") is a modern, vertically integrated steel mill that produces high-quality deformed steel rebar. As an emerging player in the southern steel market, PSML’s smaller scale presents significant growth potential. The assigned ratings reflect the high business risk inherent in Pakistan's long steel industry, characterized by economic cyclicality, exchange rate fluctuations, international steel price volatility, and competition from unregulated segment. In line with the macroeconomic challenges of FY24, sluggish economic growth led to reduced demand for construction and infrastructure projects—key drivers of steel consumption. This decline in demand led to a 30% reduction in PSML's volumes, down to 10.9mln units in FY24 (FY23: 15.6mln units). However, the topline decreased by approximately 23%, reaching PKR 2,290mln in FY24 (FY23: PKR 3,118mln), supported by favorable retention prices. Margins also improved, benefiting from these retention prices as well as inventory gains from the previous year’s raw material buildup. In July 2024, PSML installed a second furnace, raising its total capacity to 100,000 tons per annum, with plans to expand further to 150,000 tons. The new energy-efficient furnace is expected to reduce production costs, and will translate into better margins, going forward. All expansions have been equity-financed, and PSML has no plans for bank borrowings related to new CAPEX expansions, keeping leverage at a comfortable level. PSML’s equity base in FY24 remained modest at PKR 1,237mln (FY23: PKR 1,221mln). Enhanced capacities enable PSML, to explore the untapped market and for this purpose management is focusing on improving its distribution channels. PSML has largely relied on internally generated cash for working capital, but a potential rise in demand may lead to an increase in short-term borrowing. Maintaining an optimal capital structure will be crucial if volumes increase. The Company sponsor’s diversification into other businesses, including charter shipping, the paint industry, and the “Metalink” scrap business in the UK, enhances confidence in the sponsor 's financial resilience. PSML benefits from backward integration in its supply chain through charter shipping and scrap sourcing along with its vertically integrated mill and strategic location at Port Qasim, this provides a competitive edge.
The ratings depend on the Company’s ability to grow its market share through increased volume and geographical diversification. Effective and prudent management of financial risk indicators remains essential. As a family-owned and operated business, PSML faces risks associated with a single management and ownership structure. The governance framework is still in its early stages and requires improvement, though the Company is led by capable management. Furthermore, the business remains susceptible to fluctuations in macroeconomic financial indicators.

About the Entity
PSML is a private limited company incorporated in Pakistan on July 15, 2019, under the Companies Act, 2017. Its registered office is situated at C-49, K.D.A Scheme No. 1, Main Karsaz Road, Gulshan Town, Karachi, Pakistan. The Company has a melting capacity of 100,000 MT and a rerolling capacity of 175,000 MT. PSML is wholly owned by the Baghpati family, and the board is controlled by two members from the sponsoring family, including the Chairman and CEO, Mr. Faisal Baghpati, who is the man at the last mile. His presence adds significant value to the board on account of his business experience, spanning over the last 15 years.