Lahore, January 19, 2022 (PPI-OT):H. Sheikh Noor-ud-Din and Sons (Private) Limited (“The Company”) is a family-owned manufacturing arm of NRS Relief which is primarily engaged in the manufacturing of a unique range of innovative humanitarian relief products (tents, tarpaulins, canvas, mosquito nets, and other items) for international donor agencies. The need for these products arises due to natural calamities such as floods, wildfires and earthquakes or man-made crises.
During 2020, changes in ownership and governance structure of the Company affected its performance; it did not bid for new contracts with international relief agencies for the supply of core relief items, which along with Global Pandemic Crises and subsequent lockdowns led to a fall in revenue while sabotaging profitability margins. For the last two years, the Company’s sales of Long-Lasting Insecticidal Nets (LLIN) – prominent business driver – reluctantly suffered as production facility remained closed. High debt levels put adverse shock on Company’s financial profile.
Consequently, management decided to turn its major short-term borrowings to SBP’s export refinance scheme with an ultimate goal of reducing interest expenses. Going forward, the Company shall be pursuing a business philosophy; focusing low volume high margin transactions. Financial, Operational and Reputation risks shall exist for the Company in upcoming period. The ratings incorporate the Company’s long-term association with international donor agencies such as UN, UNHCR, UNICEF, Red Cross and others as a qualified vendor.
Adequate support of sponsors and other group businesses remains a key rating factor. The ownership structure of the Company was reorganized after the sponsors reached a mutual agreement. PACRA has maintained “Rating Watch” and “Negative Outlook” on the ratings on account of observed decline in sales, issues pertaining to change in ownership structure and production from LLIN of the Company. PACRA will continue to closely monitor these developments. A rating action may be taken accordingly.
Successful transition of ownership, implementation of new governance structure, improvement in sales volumes through resumption of production of netting business, and prudent working capital management remain critical for ratings. Meanwhile, prudent financial discipline – particularly conservative capital structure and upright working capital management will be followed. Any reduction in 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: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com