Press Release

VIS Assigns Initial Ratings to Hilal Foods (Private) Limited

Karachi, May 14, 2019: VIS Credit Rating Company Limited (VIS) has assigned the initial entity ratings to Hilal Foods (Private) Limited (Hilal) at ‘A/A-2’ (Single A /A - Two). The long term rating signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

The ratings assigned to Hilal takes into account the company’s moderate business risk profile given its presence in fast moving consumer goods industry and competitive pricing leading to sustained profitability. The assigned ratings are also underpinned by positive demand dynamics of the confectionary industry & established brand equity. Similar to other private limited companies, governance, internal controls and policy framework depict room for improvement.

Top line of the company depicts an increasing trend, on a timeline basis, and has primarily been a function of volumetric growth. Going forward, Hilal expects positive momentum in earnings as a result of increase in production capacity and widened product array. The company has undergone capital expenditure activities to increase the production capacity during the period under review. Gross margins of the company also depicted an improving trend.

Current ratings of Hilal factor in moderate financial risk of the company as depicted by its leveraged capital structure. Debt profile comprises both short term and long term debt along with an off-balance sheet liability in the form of Ijarah financing; this has been mobilized in lieu of the expansion plan. While moderate debt repayments are due in the coming years, cash coverages are expected to remain adequate. Given that management has no plans for major capital expenditure in the near future, leverage indicators are projected to remain within manageable limits. Ratings will be contingent on maintenance of sustainable performance metrics and adequate leverage indicators.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Ms. Muniba Khan (Ext: 215) or at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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