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The Pakistan Credit Rating Agency Limited

Date
27-Feb-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Mohsin Naseer
mohsin.naseer@pacra.com

+92-42-35869504
www.pacra.com
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Related Research

  • Sector Study | Industrial Gases (Sep 16) [View]
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PACRA assigns Instrument Rating to Sukuk of Ghani Gases Limited
 Rating Type Debt Instrument
Current
(27-Feb-2017)
Previous
(20-Jan-2017)
 Action Initial Preliminary
 Long Term A A
 Short Term - -
 Outlook Stable Stable
 Rating Watch - -

The rating recognizes the company's significant position in the industrial gases sector. The industry largely possesses oligopolistic structure: benefiting the players. With an expected growth in demand due to increase in industrialization and uptick in economic activity, GGL is pursuing an expansive strategy to become the market leader. The company's performance has improved on account of higher volumes, mainly achieved through capacity expansion and improved margins. Although the company's financial structure is leveraged, cashflows and, in turn, coverages are adequate. Given the group's expansionary stance, sustained vigilance and support from sponsors is essential. Timely completion of projects and subsequently smooth functioning is important. The sponsoring family has demonstrated support to the company in the past. The proceeds from the sukuk issue would be utilized for swapping the multiple existing long-term and short-term loan facilities into a single facility.

The rating is dependent on the company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk particularly debt coverages, remain important, wherein any significant dilution would have negative implications for the ratings.
About the Entity
Ghani Gases Limited (GGL), incorporated in 2007 and listed on PSX, is engaged in the manufacturing, sale, and trading of medical and industrial gases and chemicals. The CEO and directors along with their families collectively own majority (51%) shares of the company. The remaining shareholding of the company is held by public sector companies and financial institutions (9%) and general public (40%). The company's product slate consists of liquid oxygen, liquid nitrogen, liquid argon, and calcium carbide. The company overall capacity is 220TPD combining both GGL I (Lahore) and GGL II (Karachi), whereas GGL III (Karachi) with an installed capacity of ~ 100TPD is planned to be operational during FY18.

GGL's eight member board is majorly represented by members of sponsoring family (six), one independent director and an executive. Mr. Masroor Ahmad Khan is the Chairman of the BoD. Mr. Atique Ahmad Khan holds the office of CEO and Hafiz Farooq Ahmad is Managing Director. The Chairman oversees administrative and financial issues of the company═ż Marketing and sales are in the domain of CEO and technical production & operations in the purview of Managing Director.
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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