PACRA Maintains Entity Ratings of Reliance Petrochem (Private) Limited (30-08-2019)

Lahore, August 30, 2019 (PPI-OT): The ratings reflect adequate business profile of Reliance Petrochem (Pvt.) Limited. The Company is engaged in manufacturing and sale of different varieties of Polypropylene Bags and White-Oils. Recent increase in demand of consumer goods, urbanization and cost effectiveness has boded well for the industry. The industry is considered volatile when it comes to the procurement of raw materials (polymers and base-oils), as they are directly linked with the international prices of crude oil.

Thus, the Company’s top-line and margins have depicted fluctuations over recent years. However, Reliance Petrochem is focused on increasing the productivity and efficiency of its operations. The business is expected to grow further as the Company is in the phase of signing high-valued and long-term trading contracts with the foreign traders.

The Company intends to increase share of exports in its revenue. The profitability may come under pressure due to higher taxes as the Company enjoyed tax benefits for first five years of incorporation. Financial profile of the Company is considered adequate with intermediate leveraging. Coverages have improved recently on the back of better cash flows. Meanwhile, induction of new directors with diversified professional experience is likely to improve the quality of the Board.

The ratings are dependent on sustaining sales revenue and margins, while managing financial risk at low level. Governance framework needs improvement as the Board is dominated by the Sponsoring family. At the same time, prudent management of inventories is considered important. Significant decline in margins and/or profitability, impacting cash flows and coverages, will have negative impact on ratings.

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