Hilal Foods (Pvt.) Limited

CREDIT RATING REPORT | Apr-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
11-Apr-25 A- A2 Stable Initial -
About the Entity

Hilal Foods (Pvt.) Limited was established in 1957 with the name of Hilal Confectionary (Pvt.) Limited. Later it merged with Kings Food Company and was renamed as Hilal Foods (Pvt.) Limited. The Company's ownership is concentrated with the Munshi family. Mr. Fahad Munshi, with his sound entrepreneurial skills, serves as the Chief Executive Officer. A team of experienced professionals assist him, which is again a testimony of the sponsor’s future vision.

Rating Rationale

Hilal Foods is one of the country's leading FMCG companies in the value-added food sector, featuring advanced manufacturing facilities and renowned brands built on a foundation of innovation and excellence. Since its inception in 1957, Hilal Foods is manufacturing high-quality products with a prime focus on continuous improvement. The Company leverages the strong brand equity of its flagship brand, “Hilal,” which is a key driver of its market positioning and competitive advantage. The Company’s product line consists of more than 40 products, divided between two major verticals: Confectionary and Baking. Some of their brands are known for the niche, in which they operate like “Ding Dong”, and “Freshup” and similarly “CupKake”, and “Bake Time.” These are key consideration in the assigned ratings. The assigned ratings of Hilal Foods (Pvt.) Limited (“Hilal Foods” or “the Company”) reflects the Company’s dominant market position and ability to diversify and innovate. This diversity is well integrated into the company’s current sale composition, where PKR 1bln and more revenue is being generated from a number its products. Diversity of revenue stream is a big plus. Ratings recognize that the competition is tough and becoming increasingly multi-dimensional. Cognizant of the same, the management is proactively deploying new strategies to fend off the competition and preserve its relative position.
Hilal Foods' revenue is almost equally contributed by both segments: ~44% from the baking segment and ~56% from the confectionery. Geographically, domestic sales contribute ~93% of total revenue, while export sales account for the remaining ~7%; exports are becoming a focus of attention. The Company’s top-line revenue demonstrated a 5% year-over-year growth in FY24, principally driven by favorable adjustments in sales pricing. The Company demonstrated improved profit margins during the reporting period. Gross profit margin improved primarily due to effective cost of goods sold management and cost saving initiatives. The operating profit margin also exhibited growth, albeit at a moderated pace due to increased marketing expenditures. Additionally, a reduction in finance costs also contributed to the enhancement of net profit margin, enabling Hilal Foods to reverse the net loss incurred in FY23. The Company maintains a sound financial risk profile, supported by sufficient coverage and a well-managed working capital cycle. Leverage indicators are adequate. The Company’s proactive approach to market dynamics, adherence to global product quality standards, focus on customer satisfaction, and alignment with industry benchmarks further support its credit ratings. The sponsor's historical experience, commitment to the business, and support reinforce confidence in the Company's creditworthiness. They are also taking steps to bolster the corporate governance character of the Company by voluntarily adopting “Code of Corporate Governance”.

Key Rating Drivers

The ratings are dependent on consistent growth and improvement in margins. Maintaining sound financial discipline, prudent working capital management, and adequate cash flow and coverage will be crucial for ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Hilal Foods (Pvt.) Limited

rating analysis

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Profile
Legal Structure

Hilal Foods (Pvt.) Limited (‘Hilal Foods’ or ‘the Company’) is an unlisted Private Limited Company, incorporated in 1957, under the erstwhile Companies Ordinance, 1984 (now the Companies Act, 2017). The Company’s registered office is located in Karachi.


Background

Mr. Naeem Munshi alongside his father, Ali Muhammad Munshi established the Company “Hilal Foods (Pvt.) Limited” in 1957 as a private unlisted Company, named as Hilal Confectionary (Pvt.) Limited. Later, it merged with Kings Foods Company in 2013 and was renamed as Hilal Foods (Pvt.) Limited. The Company’s product line consists of more than 40 products including its flagship product “Ding Dong”, “Freshup”, “Aamrus Candy”,  “Chooran Chatni”, “Limopani”, “Jiggles”, “CupKake”, and “Bake Time.”


Operations

The Company’s operations are segmented into Confectionary and Banking segments. The production capacity and actual production for the confectionary plant are 3,562,768MT and 1,603,915MT with a utilization rate of 45%. Whereas, the production capacity and actual production for the baking plant are 9,317,876MT and 4,098,004MT with a utilization rate of 44%. Hilal Foods (Pvt.) Limited maintains a global presence across more than 40 countries, offering a diverse portfolio of stock-keeping units (SKUs). The Company’s head office is located in Karachi.


Ownership
Ownership Structure

The Company’s ownership structure is highly centralized, with Mr. Naeem Ali Mohammad maintaining a dominant 96.76% stake. The remaining equity is distributed among key stakeholders, including Mrs. Naqiba Naeem (0.81%), Mr. Fahad Munshi (0.97%), Mr. Faisal Munshi (0.97%), and Ms. Neha Munshi (0.49%).


Stability

Hilal Foods is family owned with the legacy of three generations. The grandfather laid the foundation and the father has since expanded and led the company to its present stage. Now, his three children—two sons and a daughter along with team of top professionals are taking it to new heights.


Business Acumen

The sponsors bring extensive experience and expertise in the food and baking industry. Their sound business acumen has been instrumental in driving the Company’s sustained success over the years. With deep industry-specific knowledge, hands-on experience, and strategic foresight, the sponsors have played a key role in shaping the Company’s growth and long-term achievements.


Financial Strength

The Company has successfully diversified into various food segments. Additionally, the Company draws its financial strength from its group entities, including Shalimar Foods, Hilal Care (Pvt.) Limited, and Hilal Retail Brands (Pvt.) Limited (Dominos Pizza).


Governance
Board Structure

The board is not truly independent of the management. The board of the Company is composed of 4 members including C.E.O and the Chairman of the board.


Members’ Profile

Mr. Naeem Munshi serves as Chairman of the board. He is a graduate of Sindh University and has over 45 years of experience successfully managing one of the largest confectionery and baking businesses in Pakistan. His leadership skills are remarkable and contribute prominently in the growth of company's business. He is the Chairman of Hilal Group and Macpac Films Ltd.


Board Effectiveness

The company has not yet established formal board committees, presenting an opportunity to enhance its governance structure. Additionally, while the Board convenes annually, formal meeting minutes are documented. However, the company is on a fast-track transformation to adopt the best practices of Code of Corporate Governance.


Financial Transparency

The External Auditors of the BDO Ebrahim & Co. Chartered Accountants a QCR-rated firm expressed an unqualified opinion of Financial Statements for the period ended Jun’24. The Firm is Category ‘A’ on the SBP panel.


Management
Organizational Structure

The company operates under a horizontal organizational structure, wherein department heads report directly to the CEO. The organization maintains a well-defined departmental framework, encompassing key functions such as: i) Production ii) Sales & Marketing, iii) Research & Development (R&D),  iv) Finance,  v) Human Resource,  vi) Legal,  vii) Quality Assurance viii)Information Technology, ix) Supply Chain, x) Internal Audit. Each department functions independently under the leadership of its respective head, ensuring streamlined reporting and operational efficiency.


Management Team

Mr. Fahad Munshi serves as the Chief Executive Officer (C.E.O) of the Company. He also serves as an Executive Director of Hilal Care and Hilal Retail Brands, and a Non-Executive Director at Macpac Films Ltd. Fahad Munshi holds a B.Sc. in Marketing from Bentley University and a Financial Diploma from Harvard Business School. With over a decade of experience as Head of Operations, he has developed extensive expertise in food manufacturing and the FMCG sector. His core competencies include process improvement, product development, and innovation. Mr. Fahad successfully restructured the organizational framework, launched prominent brands and marketing campaigns, secured a “Grade AA” rating from the British Retail Consortium (BRC), and facilitated the enterprise-wide implementation of SAP S/4HANA and SalesFlo, a sales and distribution MIS system.


Effectiveness

The company has well-established management committees in place. These include i) Treasury Management Committee, ii) Sales Review Committee, iii) IRD Committee, iv) Sales & Operations Planning, v) Financial Review Committee, vi) Internal Audit Committee. Vii) HR Committee and viii) IT Steering Committee. The CEO and the head of the respective committees actively participates in the decision making.


MIS

The company employs SAP S/4HANA, software, a specialized inventory management solution tailored for manufacturers and tool producers. To ensure optimal performance, the software is continuously monitored and maintained by the vendor.


Control Environment

The company has a dedicated internal audit function, supported by an audit committee that meets quarterly under the chairmanship of an independent consultant to ensure efficiency. HFL maintains a formal Regulatory and Legal department to oversee all company-related legal matters. Regulatory compliance related to products and processes is managed by the Quality Assurance department, including licensing, registration with PSQCA, PFA, SFA, SEPA, and other relevant authorities. Product and process development is led by the Innovation & Research Department (IRD), which evaluates regulatory requirements in accordance with applicable laws and customer specifications.


Business Risk
Industry Dynamics

In Pakistan, the convenience food market is primarily dominated by domestically produced products. This industry is highly competitive, with products that are particularly sensitive to price fluctuations. A significant portion of the market is also held by unbranded products, which play a notable role. Production of food groups increased by 1.7 percent in FY24, compared to a contraction of 7.1 percent in FY23. The food sector in Pakistan is experiencing rapid growth, driven by population increase, inflation, urbanization, and evolving consumer lifestyles.


Relative Position

The Company has established strong brand recognition in the Confectionary and Baking industry, with its flagship products “Ding Dong”, “Freshup”, “Aamrus Candy”,  “Chooran Chatni”, “Limopani”, “Jiggles”, “CupKake”, and “Bake Time” and becoming widely recognized for their quality and reliability. The Company has a market share of 24% in baking and 23% in confectionary.


Revenues

Hilal Foods is one of the country's leading FMCG companies in the value-added food sector, has consistently demonstrated revenue growth and successfully navigated market fluctuations, maintaining a strong financial position. The Company’s product line consists of more than 40 products, divided between two major verticals: Confectionary (56%) and Baking (44%). The Company’s major portion of revenue derives from Cupkake (16%) followed by Freshup (14%), Jiggles (12%), Ding Dong (12%), Candies (11%), and others (35%). In FY24, the Company achieved a total net revenue of PKR 17bln (FY23: PKR 16bln), driven by higher sales volumes and increased prices.


Margins

The Company effectively maintained strong margin management during FY24. The gross profit margin experienced a significant increase by ~ 4%, attributable to enhanced cost of goods sold optimization strategies. This improvement positively impacted operational profitability, as a result of effective expense management. Furthermore, a reduction in finance costs contributed to improved financial performance. Consequently, the Company successfully reversed the net loss incurred in FY23, indicating a substantial turnaround in overall profitability.


Sustainability

The Company has shown growth trajectory since its inception and now the drive towards the future is stronger with a clear strategic direction within industry specific ecosystem.


Financial Risk
Working capital

Hilal Foods exhibits enhanced working capital management in FY24, characterized by a notable reduction in average inventory days to 32 (FY23: 42), indicating improved inventory efficiency and a faster conversion cycle. Concurrently, trade receivable days experienced a marginal increase to 7 (FY23: 6), suggesting slightly extended collection periods, though remaining relatively short. The combined effect resulted in a significant decrease in gross working capital days to 38 (FY23: 48), reflecting a shorter operating cycle. Stable trade payable days at 50 indicate consistent payment terms with suppliers. Consequently, the net working capital days improved significantly to -12 days (FY23: -2 days). This implies that Hilal Foods is effectively managing its working capital, collecting cash from customers and potentially utilizing supplier credit terms more efficiently than the time taken to liquidate inventory, thereby freeing up cash flow.


Coverages

The Company demonstrated a significant improvement in its debt servicing capacity during FY24. The EBITDA to finance cost ratio increased substantially to 3.0x (FY23: 1.3x), indicating a stronger ability to cover interest obligations with earnings before interest, taxes, depreciation, and amortization. This trend is further supported by the enhanced FCFO to finance cost ratio, which rose to 2.7x in FY24 (FY23: 1.3x), reflecting a greater coverage of finance costs through free cash flow from operations, which itself saw a notable increase to PKR 1,551 million (FY23: PKR 959 million). Consequently, the debt payback ratio improved dramatically to 3.6x in FY24 (FY23: 23x), signifying a considerably reduced timeframe required to repay outstanding debt using FCFO. This collective improvement in these key financial metrics underscores a strengthened financial position and enhanced debt sustainability for the Company.


Capitalization

The Company has a moderately leveraged capital structure, with a leverage ratio of ~ 30% (FY23: 42%), indicating a strengthened equity position relative to debt. As of FY24, total borrowings amounted to approximately PKR 2.3 billion (FY23: ~PKR 3.6 billion), a decrease reflecting active debt management. This debt portfolio, comprising both short-term (~50% of the total) and long-term instruments, is strategically allocated toward supporting working capital requirements and facilitating expansion initiatives. Concurrently, the Company's equity base expanded to approximately PKR 6.3 billion (FY23: ~PKR 5.5 billion), further strengthening its financial structure and contributing to the improved leverage metrics.
 
 

Apr-25

www.pacra.com

Hilal Foods (Pvt.) Limited

financial summary

(PKR mln)

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Jun-24
12M		 Jun-23
12M		 Jun-22
12M
Audited Audited Audited
A. BALANCE SHEET
1. Non-Current Assets 10,069 10,399 10,573
2. Investments 88 67 49
3. Related Party Exposure 102 121 87
4. Current Assets 2,973 3,464 3,598
5. Total Assets 13,233 14,051 14,308
6. Current Liabilities 3,942 4,082 3,482
7. Borrowings 2,286 3,589 4,442
8. Related Party Exposure 356 447 116
9. Non-Current Liabilities 375 428 513
10. Net Assets 6,274 5,505 5,754
11. Shareholders' Equity 6,274 5,505 5,754
B. INCOME STATEMENT
1. Sales 17,206 16,348 15,274
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 1,551 959 (548)
b. Net Cash from Operating Activities before Working Capital Changes 976 407 (914)
c. Changes in Working Capital 311 543 940
1. Net Cash provided by Operating Activities 1,286 950 27
2. Net Cash (Used in) or Available From Investing Activities (306) (163) (135)
3. Net Cash (Used in) or Available From Financing Activities (285) (539) (759)
4. Net Cash generated or (Used) during the period 696 248 (867)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 5.2% 7.0% 30.3%
b. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 10.8% 9.2% 2.6%
2. Working Capital Management
a. Gross Working Capital (Average Days) 38 48 47
b. Current Ratio (Current Assets / Current Liabilities) 0.8 0.8 1.0
3. Coverages
a. EBITDA / Finance Cost 3.0 1.3 0.1
b. FCFO / Finance Cost+CMLTB+Excess STB 0.5 0.2 -0.2
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 3.6 23.3 -4.2
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 29.6% 42.3% 44.2%
b. Entity Average Borrowing Rate 17.5% 17.7% 11.3%

Apr-25

www.pacra.com

Hilal Foods (Pvt.) Limited

rating scale

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Apr-25

www.pacra.com

Hilal Foods (Pvt.) Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
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    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
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    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
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Apr-25

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