PACRA Maintains Entity Ratings of Bulleh Shah Packaging (Pvt.) Limited; Places Ratings on Rating Watch (RW)

The ratings of Bulleh Shah Packaging (Private) Limited (‘BSPL’ or ‘the Company’) reflect its strong sponsor profile, well-established market presence, and adequate financial standing. As a wholly-owned subsidiary of Packages Limited, BSP benefits from a sound governance framework, a robust control environment, and an experienced management team. BSP is engaged in the manufacturing of corrugated boxes as well as paper and board products. According to management estimates, the Company holds approximately 12% share of the paper and board market. It also remains the sole local producer of liquid packaging board and commands a 14% share in the corrugated board segment.
In calendar year 2023, BSP undertook balancing, modernization, and replacement (BMR) initiatives to enhance productivity and capture a greater share of the imported paperboard market. This expansion was financed through debt, leading to a notable increase in finance costs. Concurrently, during CY24, gross margins were adversely impacted due to weakened demand for certain product categories, primarily driven by elevated inflation and rising fuel and energy prices. To support its customer base and remain competitive, the Company had to reduce product prices despite facing a higher cost of sales. Consequently, during CY24, the gross margins were significantly affected and fell to 5.1% from 16.6% in Dec'23. While the net profit margins declined to -9.2% (CY23: 0.4%). The Company reported a net loss of PKR (6.1bln) (CY23: 226mln). While the equity declined to PKR 8bln (CY23: PKR 13.7bln).
Leverage remains elevated due to significant short-term and long-term borrowings utilized to support working capital needs and ongoing business operations. In response, management is implementing measures to restore profitability and has formulated a three-year strategic plan. Following this, the Board of Directors approved a capital injection of PKR 8 billion into BSP in various forms—including ordinary share capital, subordinated debt, and the potential conversion of existing loans into equity—with the objective of optimizing the Company’s capital structure. Accordingly, a Rating Watch has been placed to monitor the Company's future stability and the successful execution of its strategic initiatives.
The ratings are dependent upon the management's capacity to enhance margins while maintaining its market share. Effective management of working capital, along with sustaining adequate cash flows and coverage ratios, is crucial for the ratings. Going forward, the successful implementation of the strategic plan would remain crucial.

About the Entity
Bulleh Shah Packaging (Private) Limited was incorporated as a private limited company on September 16, 2005. The primary purpose of the project was the backward integration of the packaging business of Packages Limited. The majority stake of BSP lies with Packages Limited which owns ~100% of the total shares. Mr. Syed Hyder Ali is the Chairperson of the board and Mr. Nasir Zaman is the CEO of the Company.