PACRA Maintains the Entity Ratings of Swat Agro Chemicals

The assigned ratings of Swat Agro Chemicals ('Swat Agro' or 'the Business') drive strength from the sponsor's substantial experience within the pesticide industry. The Business maintains an established presence in the domestic market with a diverse product portfolio, encompassing insecticides, fertilizers, micronutrients, fungicides, household products, weedicides, adjuvants, and agri-equipment. Further rating support is derived from a key strategic collaboration with BASF and the successful operation of its state-of-the-art SC & EC formulation plant, complemented by ongoing strategic expansion initiatives in seed development, packaging, and the real estate segment. The Business's consistently maintained a sustainable risk profile, where the revenue mix is dominated by micronutrients (~28%), insecticides (~26%), and fertilizers (~24%). Despite a ~21% contraction in revenue, attributable to muted growth across the broader agricultural economy, the Business successfully maintained solid gross margins, translating into a stable bottom line. On the financial front, working capital needs are met through a prudent combination of internal cash flow and short-term credit facilities, supported by a notably low-leverage capital structure and robust debt coverage metrics, ensuring the overall business and financial risk is currently assessed as manageable. However, strengthening the governance framework, improving financial transparency through the induction of an SBP-panel auditor, and developing robust internal control mechanisms remain imperative to the ratings.
The ratings are dependent on Swat Agro's ability to sustain the operations, keeping the business and financial profile at an optimal level. Moreover, strict adherence to debt matrix along with maintaining cashflows and coverages at an adequate level remains imperative. This along with improved governance framework and internal controls would benefit ratings.

About the Entity
Swat Agro Chemicals ('Swat Agro' or 'the Business') was incorporated in 1996 as a partnership concern as per the Partnership Act, 1932. Ownership resides among three partners, where major stake (~50%) lies with Mr. Barkat Ali Khan. While, the remaining stake i.e. ~50 % is held equally by Ms. Fouzia Nazneen and Mr. Muhammad Alam Khan. Mr. Barkat Ali Khan heads the Business as the CEO, and is assisted by an experienced management team.