PACRA Assigns Initial Entity Ratings to Hadeed Pakistan (Pvt.) Limited

Hadeed Pakistan (Pvt.) Limited (“the Company” or “Hadeed”) is a family-operated business and a relatively new entrant in the flat steel manufacturing industry, specifically in the cold rolling (CRC) segment. While a few established players dominate CRC industry in southern region of the Country, Hadeed has positioned itself as the sole player operating in Punjab, giving it a unique regional advantage. The ratings reflect the Company’s growing market presence, with its CRC product share increasing from 7% in FY20 to 27% in FY24 since commencing operations. The Company’s resilience amid early challenges like COVID-19 and import restrictions reflects its strong business understanding. The ratings also reflect the moderate to high business risk of the flat steel sector, driven by reliance on imported raw materials, limited local supply, and declining CRC demand amid a weak macroeconomic environment. In FY24 the industry continued to face headwinds, demand reduced by almost 40% from a peak of 500,000MT in FY21, with projections indicating stability at similar levels through FY25. Approximately 85% of local demand was met by the two leading domestic players; however, their market share is gradually declining as the Company’s share has slightly increased, now standing at around 27%. The Company anticipates sales of approx. 100,000 tons by the end of FY25 and aims to maintain this level, going forward. Imports, primarily from China, account for 20% of demand, although duties have been introduced to protect local manufacturers. Hadeed follows a hybrid sales model, comprising direct sales to corporate clients and sales through dealers. The dealer network accounts for the majority of sales; however, the customer base remains concentrated among a few key players, increasing concentration risk. The Company reported a turnover of PKR 19bln in FY24 and PKR 14bln in 9MFY25 (FY23: PKR 13bln), indicating steady volumetric growth. Profit margins remain under pressure due to the declining raw material prices—currently stood at $510 per ton—leading to inventory losses and impacting overall profitability. The Company in line with industry operates with thin margins, with gross margins dropping to 8.8% in 9MFY25 (FY24: 11.8%, FY23: 12.3%) and net margins declining to 3% (FY24: 4%, FY23: 1.7%). To enhance operational efficiency, the company plans to install solar power generation, reducing reliance on the national grid. Its financial risk primarily stems from short-term borrowings required to support working capital—an inherent feature of the Company’s business model. The Company maintains a moderate leverage position, with a gearing ratio of 36%, primarily consisting of short-term borrowings. Management intends to maintain this level without further leveraging, reflecting a conservative financial strategy. The equity base stands at PKR 4.4bln, of which approx. PKR 2bln represents accumulated profits. Management plans to retain this PKR 2bln as unappropriated profit within equity. Any shareholder distributions will only be considered from profits exceeding this threshold, ensuring the retained earnings remain preserved to support the Company’s financial stability.
The ratings remain sensitive to macroeconomic improvements that could support demand recovery and margin normalization. Maintaining sound financial metrics and enhancing operational efficiency remains imperative for the assigned ratings, while the Company’s strategic plans to diversify its product slate through the establishment of a galvanized plant and exploration of export opportunities are viewed positively.

About the Entity
Hadeed Pakistan (Private) Limited, incorporated in 2013 and operational since 2019, manufactures cold-rolled steel sheets and coils for various sectors through a fully integrated facility with an annual capacity of 300,000 MT. The Company is wholly owned by Hamid family and led by Mr. Hamid Daud (CEO) with active involvement from other family members including second-generation.