Press Release

VIS Reaffirms Entity Ratings of Saakh Pharma (Private) Limited

Karachi, February 25, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Saakh Pharma Private Limited (SPPL) at ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 25, 2018.

Assigned ratings take into account SPPL’s growing business operations along with healthy growth in sales revenue and improvement in gross margins over time. Reaffirmation of ratings draws comfort from healthy growing demand of pharmaceutical sector and competitive advantages (duty protection, lower lead time and facility of procuring desired quantity) enjoyed by local API manufacturers’ vis-à-vis imports. The ratings are, however, constrained by limited quantum of cash flows and vulnerability of earning profile to exchange rate risk (as major portion of raw material is imported). Leverage indicators have trended upwards on account of higher utilization of short term debt mobilized for working capital requirements and small equity size; however, comfort is drawn from conservative financial policy of undertaking capex through internal capital generation and equity injection. Ratings remain dependent on improving profitability and liquidity profile while managing leverage indicators within prudent levels. Overall corporate governance framework also has room for improvement including formulization of internal audit functions.

As per industry estimates, ~90% of the country’s API requirement is fulfilled through imports. While capital requirements and entry barriers are considered low, extensive time for licensing requirements and increasing working capital requirements may act as entry barriers. SPPL is ranked at number two among half a dozen prominent API manufacturers in Pakistan. Currently, local API manufacturers are reliant upon China for their raw material procurement, and in the backdrop of recent corona virus outbreak, maintaining procurement and supply chain efficiency is considered important.

SSPL’s topline as compared to last year has doubled and the growth momentum is expected to continue. Addition of new products (Paracetamol & Sitagliptin) and services (Taste masking & Pelletization), increase in average selling prices (of all products) and timely achievement of projected volumes were the key factors behind significant growth in sales during outgoing year. During FY19, significant rupee devaluation resulted in an exchange loss for the company, thus negatively affecting cash flow coverage multiples. Going forward, growth in sales is expected to stem from the launch of ‘Pharma Sugar’ and increase in capacities of Taste masking and Pelletization services.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 202) or the undersigned (Ext: 207) at (021) 35311861-66 or email at

Jamal Abbas Zaidi

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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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