PACRA Downgrades Entity Ratings of H. Sheikh Noor-ud-Din and Sons (Private) Limited

Lahore, February 03, 2020 (PPI-OT): H. Sheikh Noor-ud-Din and Sons (Private) Limited (The Company) is the manufacturing arm of NRS International which is primarily engaged in manufacturing of relief and health items for international donor agencies. In FY19, due to ongoing ownership related changes, the Company did not bid for new contracts with international relief agencies, which led to a decrease in revenue and overall profitability. The Company’s sales of Long Lasting Insecticidal Nets (LLIN) – Major revenue contributor- reluctantly suffered as production stopped. To mitigate the impact, the sponsors transferred all the key underlying products of previously established brand ‘’Tana Netting’’ to a recently established brand ‘’Moon Netting’’.

Loss of revenue and higher total borrowings pressured the Company’s financial profile. The Company is in the process of converting its entire short-term borrowings to SBP’s export refinance scheme to save interest expense and also rescheduling certain loans to mitigate this to an extent. The pressure on business profile is expected to persist in near future.

The ratings incorporate the Company’s long term association with international donor agencies such as UNHCR, UNICEF, Red Cross and others as a qualified vendor. Strong support from sponsors and other group businesses remains a key rating factor. The ownership structure of the Company has been reorganized after the sponsors reached an agreement. The process is expected to be completed till June-2020. PACRA has maintained “Rating Watch” on the ratings and will continue to closely monitor these developments. A rating action may be taken accordingly.

Successful transition and implementation of new ownership structure, improvement in sales volumes through commencement of production of netting business and prudent working capital management remain critical for ratings. Meanwhile, adherence to agreed financial matrices(Short term borrowing to Net working capital less than 70%, cash debt coverages of above 2.5x) and improving governance practices are important. Any significant delays in production leading to lower sales and/or deterioration in coverages will impact the ratings negatively.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com