Bulleh Shah Packaging (Pvt.) Limited

CREDIT RATING REPORT | May-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
08-May-25 AA- A1 Stable Maintain YES
05-Sep-24 AA- A1 Stable Maintain -
05-Sep-23 AA- A1 Stable Maintain -
05-Sep-22 AA- A1 Stable Initial -
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.

Rating Rationale

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.

Key Rating Drivers

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.

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

Bulleh Shah Packaging (Pvt.) Limited

rating analysis

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Profile
Legal Structure

Bulleh Shah Packaging (Private) Limited ("BSP" or the "Company") was incorporated as a private limited company on September 16, 2005 under the Companies Act,2017. The Company's primary object is to carry on the business of manufacture and sale of paper & board of all kinds and corrugated boxes.


Background

The Company was established in a new green project incorporated as a separate entity under the name of Bulleh Shah Paper Mills (BSPM). In September 2012, joint venture between Stora Enso (35%) and Packages Limited (65%) was established and the name has been changed to Bulleh Shah Packaging (Pvt.) Ltd. Lately, in 2017 Stora Enso took an exit making the Company wholly owned by Packages Limited.


Operations

Bulleh Shah Packaging (Private) Limited is engaged in the manufacturing and sale of Corrugated boxes, Paper, board and Other products of paper. The installed capacity of paper & board is 360,000 MT per annum, while that of the corrugated box is 130,000 MT per annum.


Ownership
Ownership Structure

Bulleh Shah Packaging (Pvt.) Limited is 100% owned subsidiary of Packages Limited.


Stability

Packages Limited is the flagship investment holding company of the Ali Group which has a history spanning over a period of more than 65 years. Packages'© investment book comprises entities engaged in the manufacturing and sale of inks, flexible packaging material, paper, board, and corrugated boxes, biaxially oriented polypropylene film and cast polypropylene film, production and sale of ground calcium carbonate products, entities engaged in insurance, power generation, real estate segment of the economy and recently diversifying into manufacturing of corn-based starch.


Business Acumen

The Group is ranked amongst the leading industrial groups of the country with interests in paper and packaging, financial institutions, and education. Packages Limited has significant successful joint ventures with international conglomerates and long standing relationship with various multinational companies.


Financial Strength

Packages has a consolidated asset base of ~ PKR 248.6bln supported by ~ PKR 88.7bln of equity at the end of Dec'24.


Governance
Board Structure

The Company has an eight-member board comprising one independent director, five non-executive directors and one executive director (including the CEO). The Board is chaired by Mr. Syed Hyder Ali. Apt Board size and presence of independent oversight supplement good governance framework.


Members’ Profile

The BoD, with a well-diversified background and relative expertise of its members, is a key source of oversight and guidance for the management. The Chairman of the Board Mr. Syed Hyder Ali is a seasoned business professional and carries a track record of successful business ventures with him. All other members are professionally qualified with extensive experience and a diversified skill mix.


Board Effectiveness

The Board held several meetings throughout CY24, with the majority of attendance to discuss pertinent matters. The minutes of the meetings are documented properly. To ensure effective governance, the Board has formed three committees, namely, (i) Audit Committee, (ii) Executive Committee, and (iii) Human Resource and Remuneration Committee. Both committees are chaired by non-executive directors.


Financial Transparency

M/s A.F. Ferguson & Co. is the external auditor of the Company. They gave an unqualified opinion on the Company’s financial statements for the year ended Dec 31, 2024. The board has also established an internal audit department.


Management
Organizational Structure

The Company has established a well-defined management structure divided into functional departments with clear lines of responsibilities.


Management Team

Mr. Nasir Zaman has been appointed as the Chief Executive Officer (CEO) of the Company following the departure of his predecessor, Mr. Asghar Abbas. Mr. Bilal Naeem, the CFO, is a Chartered accountant and has more than 10 years of experience. He has a strong background in accounting and finance within Packages Group, having previously served from 2013 to 2019 in the Comptroller of Accounts and Business Controller position. Mr. Syed Ali Murtaza Bukhari serves as the Business Unit Head. He joined Packages in 2003 as a Production Engineer and has been associated with the Group for 20 years. He is a Mechanical Engineer from UET with an MBA from Nanyang Technological University, Singapore.


Effectiveness

The experience of the sponsors along with a professional management team has helped the Company to streamline their operations and cut down on their costs. The production facilities have minimal wastage which is effectively managed through re-cycling and re-using in the process 250 tons of paper per day.


MIS

To generate MIS and operational reports, ERP software, SAP ECC6 is used.


Control Environment

To ensure operational efficiency, the Internal Audit Function is in place that identifies and reports risks. The audit committee reviews the internal audit department reports and planned activities.


Business Risk
Industry Dynamics

The price of the major raw material used in the making of plastic, Polyethylene Terephthalate (PET), is correlated with international oil prices. Any volatility in the oil prices and exchange rates is, therefore, a significant source of risk for this segment. The variability in oil prices during FY24 was mainly due to the supply chain disruptions caused by the war in the Middle East and increased raw material prices on a global level due to high inflation and interest rate hikes. However, during FY24, oil prices decreased by ~3.0% YoY due to low demand for oil from major importers like China due to the economic slowdown. (Source: PACRA Sector Study)



Relative Position

The Company’s market share in the overall industry (Paper & Board) is almost ~12%. Liquid packing board (falls under the purview of paper & Board) - the Company is the sole manufacturer in this segment, and Corrugated board – BSP is the major supplier and holds 14% market share.


Revenues

The Company generates revenue from the sale of Paper & Board and corrugated Board in the local market as well as through exports. During CY24, the top line of the Company declined by ~2% and stood at PKR 57bln (CY23: PKR 59bln). As a result of a large expansion in the plants and machinery of BSP, the net profitability was impacted by higher finance cost. The finance cost increased to PKR 7,842mln (CY23: PKR 6,102mln). During CY24, the Company reported a net loss of PKR 6,100mln (CY23: PKR 226mln), which is mainly attributed to an increase in the cost of goods sold, which inclined by 12% and reported at PKR 55bln (CY23: PKR 49bln). Also, the distribution and marketing expenses increased by 32% and stood at PKR 1,221mln (CY23: PKR 921mln) and administrative expenses rose by 25% and stood at PKR 908mln (CY23: PKR 728mln). 


Margins

The increased raw material costs and high inflationary pressure contributed to reduced gross and operating margins. The GP margin decreased from ~ 16.6% in CY23 to ~ 4.5% in CY24. While the OP margin decreased from ~ 13.8% in CY23 to ~ 0.8% in CY24. Hence, the net profit margin reflected a massive decrease from ~0.4% in CY23 to ~ -10.5% in CY24.


Sustainability

The Company has a well-established brand name in the market, especially in consumer products. Going forward, in order to strengthen its market position, BSP has recently done BMR to enhance the production capacity of the paper and board division and the corrugator division. In response to elevated leverage due to significant short-term and long-term borrowings utilized to support working capital needs and ongoing business operations, the 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.


Financial Risk
Working capital

BSP's working capital management is supported through a short-term running finance facility obtained from a consortium of Banks. Considering the raw material lead time and reduced demand of product in CY24, the inventory days of the Company stood at ~127days (CY23: ~136days). The trade receivables days inclined to ~35days (CY24: 32days). Also, trade payable days are inclined to ~49days (CY23: 47days). The average net working capital days during CY24 were reported at ~112days (CY23: 121days).


Coverages

In CY24, the Company’s FCFOs decreased to PKR 2,642mln (CY23: PKR 9,509mln). In CY24, FCFO/Finance cost declined to ~ 0.3% (CY23: 1.6%) due to a significant increase in the finance cost.


Capitalization

The Company has a highly leveraged capital structure. Long-term debt is related to expansion activities, whereas short-term debt is related to working capital management. The Company has planned to finance CAPEX partially with a mix of debt and equity. At the end of CY24, the long-term borrowing has increased to ~PKR 23,589mln (CY23: PKR 16,593mln), and the fixed assets increased to ~PKR 36,942mln (CY23: PKR 34,375mln). Furthermore, the short-term borrowing declined to ~PKR 19,563mln (CY23: PKR 24,572mln). Consequently, at the end of CY24, the total borrowing has increased to ~PKR 46,942mln  (CY23: PKR 43,394mln).
 
 

May-25

www.pacra.com

Bulleh Shah Packaging (Pvt.) Limited

financial summary

(PKR mln)

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Dec-24
12M		 Dec-23
12M		 Dec-22
12M
A. BALANCE SHEET
1. Non-Current Assets 38,381 34,697 26,349
2. Investments 6 6 6
3. Related Party Exposure 0 178 206
4. Current Assets 29,442 34,047 33,257
a. Inventories 17,574 22,733 21,445
b. Trade Receivables 6,399 4,590 5,619
5. Total Assets 67,829 68,927 59,818
6. Current Liabilities 11,027 8,678 10,163
a. Trade Payables 9,368 6,262 9,059
7. Borrowings 46,942 43,394 31,585
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 1,766 3,140 2,291
10. Net Assets 8,095 13,716 15,778
11. Shareholders' Equity 8,095 13,716 15,778
B. INCOME STATEMENT
1. Sales 57,870 59,074 47,589
a. Cost of Good Sold (55,262) (49,257) (37,814)
2. Gross Profit 2,608 9,817 9,775
a. Operating Expenses (2,129) (1,649) (1,344)
3. Operating Profit 479 8,168 8,431
a. Non Operating Income or (Expense) 936 (614) (650)
4. Profit or (Loss) before Interest and Tax 1,416 7,554 7,782
a. Total Finance Cost (7,842) (6,102) (2,296)
b. Taxation 326 (1,226) (2,206)
6. Net Income Or (Loss) (6,100) 226 3,280
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 2,642 9,509 8,734
b. Net Cash from Operating Activities before Working Capital Changes (6,212) 3,631 6,700
c. Changes in Working Capital 8,278 (5,138) (15,631)
1. Net Cash provided by Operating Activities 2,066 (1,507) (8,931)
2. Net Cash (Used in) or Available From Investing Activities (4,347) (8,531) (4,847)
3. Net Cash (Used in) or Available From Financing Activities 6,935 4,634 4,294
4. Net Cash generated or (Used) during the period 4,654 (5,404) (9,483)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -2.0% 24.1% 28.8%
b. Gross Profit Margin 4.5% 16.6% 20.5%
c. Net Profit Margin -10.5% 0.4% 6.9%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 18.9% 7.4% -14.5%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] -55.9% 1.5% 21.9%
2. Working Capital Management
a. Gross Working Capital (Average Days) 162 168 165
b. Net Working Capital (Average Days) 112 121 111
c. Current Ratio (Current Assets / Current Liabilities) 2.7 3.9 3.3
3. Coverages
a. EBITDA / Finance Cost 0.5 1.8 4.3
b. FCFO / Finance Cost+CMLTB+Excess STB 0.2 1.1 2.1
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) -5.5 5.5 1.9
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 85.3% 76.0% 66.7%
b. Interest or Markup Payable (Days) 77.6 126.9 176.3
c. Entity Average Borrowing Rate 17.8% 17.3% 10.2%

May-25

www.pacra.com

Bulleh Shah Packaging (Pvt.) Limited

rating scale

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May-25

www.pacra.com

Bulleh Shah Packaging (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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    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    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
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
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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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    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
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  6. Probability of Default
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May-25

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