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The Pakistan Credit Rating Agency Limited

Date
29-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Faizan Arif
faizan.sufi@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Food and Allied (Dec 17) [View]
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PACRA Assigns Initial Entity Ratings of Tahir Omer Industries Limited
 Rating Type Entity
Current
(29-Dec-2017)
 Action Initial
 Long Term BBB
 Short Term A2
 Outlook Stable
 Rating Watch -

The ratings reflect TOIL’s adequate business profile. Volumetric growth in sales, on the back of recent capacity expansion. Overall gross margins squeezed mainly due to process in-efficiencies, resulting in high cost of production. However, margins are expected to improve in near future, once expansion in enhancing capacities will get streamlined, hence consolidating volumes. Lean inventory management system and related efficiencies continued to remain the competitive edge. Increased topline on account of bulk oil sale as well as management’s focus on the front end sale through establishing their brand in the market would enhance the future prospects. However, being a largest importer of seeds (Canaola, soyabean) in Pakistan, there is an inherent risk involved of currency fluctuations and prices of raw material, which would lead to deteriorating margins if not capped. The financial risk profile of the company is characterized by moderate leveraging. However, TOIL’s management is committed to reduce their reliance on short-term borrowings, thus resulting in reduced debt levels in next two to three years.

The ratings are dependent on the management's ability to prudently mange the liquidity and debt profile of the company, particularly working capital, while sustaining business margins. However, comfort is drawn from the company’s commitment to not involve in trading of commodities. Envisaged improvement in business and financial profile along with effective changes in governance framework would be rating positive.
About the Entity
Tahir Omer Industries Limited, Flagship Company of “KHALIS GROUP” incorporated in 1992 as a private limited company in Pakistan under the Companies Ordinance 1984. However, it is converted into a public company in 2012. The company is primarily engaged in manufacturing and sale of edible oil, ghee, meal and their by-products. Mr Rana Iqbal Hussain, the founder started his business in the name of his two sons. Majority of the shareholding of TOIL is owned by Mr. Rana Iqbal Hussain (~35%), followed by his two sons, Rana Tahir (~20%), Rana Omer (~20%) and M/s Khalis Welfare Foundation (~25%). The company under the brand of “Khalis”, flagship brand of Tahir Omer specializes in cooking oil (Canola & Sunflower) and Banaspati Ghee. With aggregate production capacity of 647,500 metric tons per annum, TOIL supplies edible and meal to large companies in bulk quantities.

TOIL’s board of directors, comprising three members including Chairman and Chief Executive Officer (CEO), comprised of the sponsoring family. The CEO, Mr. Rana Iqbal Hussain, also holds the office of the Chairman, since inception. Mr. Rana Iqbal Hussain (CEO & Chairman) - oversees daily operations. Mr. Iqbal is supported by an experienced 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.
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