The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Upgrades Entity Ratings of Reliance Petrochem (Pvt.) Limited

Rating Type Entity
(16-Mar-21 )
(28-Aug-20 )
Action Upgrade Maintain
Long Term BBB+ BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect adequate business profile of Reliance Petrochem (Pvt.) Limited. The Company is engaged in manufacturing and sale of different varieties of Polymers and White-Oils. As a part of strategic business plan the Company is expanding its product range and now started to manufacture solvents which are widely used in paint manufacturing and chemical industry. Recent increase in demand of consumer goods, urbanization and cost effectiveness has boded well for the industry. The industry is considered volatile when it comes to the procurement of raw materials (polymers, base-oils and white spirit), as they are directly linked with the international prices of crude oil. Thus, the Company's top-line and margins have depicted fluctuations over recent years. However, Reliance Petrochem is focused on increasing the productivity and efficiency of its operations. The business has shown significant revenue growth during FY20 and to stabilize this momentum the Company has signed high-valued long-term contracts with the renowned foreign oil trading companies. Going forward the Company intends to increase exports sales which will enhance margins and profitability in future. During outbreak of Covid-19 the Company launched hand sanitizer by considering the need and demand of the market which also helped to achieve better financial performance. Financial profile of the Company is considered adequate with intermediate leveraging. Coverages have improved considerably on the back of better cash flows. Company needs to achieve diversification while reducing customer and geographical concentration.
The ratings are dependent on sustaining sales revenue and margins, while managing financial risk at low level. Governance framework needs improvement as the Board is dominated by the Sponsoring family. At the same time, prudent management of inventories is considered important. Significant decline in margins and/or profitability, impacting cash flows and coverages, will have negative impact on ratings.

About the Entity
Reliance Petrochem Industries was incorporated in 2013 as a private limited company under the repealed Companies Ordinance 1984. The Sponsoring family is involved in trading business even before the partition of India and Pakistan. Trading of petrochemicals was started by Mr. Jai Kumar, son of Mr. Bool Chand. As the business grew, sponsors engaged in the manufacturing of polypropylene bags.
The board of Reliance Petrochem comprises of three brothers. Mr. Jawahar Lal is the CEO and also heads the board. Mr. Anil Parkash (Director) and Mr. Jai Kumar (Managing Director) are the other two board members. They collectively hold 100% ownership of the Company. The Company’s CEO – Mr. Jawahar Lal – has overall 24 years of experience in the chemical sector. He is responsible for operations of the Company and associated with the board since inception. He is supported by an able management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.