Press Release
VIS Reaffirms Entity Ratings of Faizan Steel
Karachi, January 28, 2026: VIS Credit Rating Company Limited (“VIS”) has reaffirmed the entity ratings of Faizan Steel (“FS” or “the Firm”) at ‘BBB+/A2’ (Triple B plus/A Two). Medium to long term rating of 'BBB+' indicates adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating remains ‘Stable’. Previous rating action was announced on December 30, 2024.
FS is a partnership concern, engaged in the manufacturing and sale of steel bars. The Firm’s manufacturing plant is located at S.I.T.E area, Karachi and is equipped with a fully automatic direct steel re-rolling mill, a high-end melt shop, and a 230 ft. cooling bed. FS has an integrated setup in place, where shredded scrap is used to manufacture steel billets, and is then directly converted into bars. FS’s product range includes Premium bars, Seismic bars, Optimum bars, Heavy Duty bar and C-bar.
Pakistan’s steel bar industry carries a high business risk due to volatile demand, reliance on imported inputs and energy-intensive production. Demand depends heavily on construction activity; while public infrastructure spending provides some support, private sector weakness, high interest rates, and project delays cause instability. Profitability is further constrained by fluctuating global raw material prices, exchange-rate depreciation and rising electricity and gas tariffs. Frequent energy supply disruptions add to cost pressures. Intense competition from domestic and imported steel limits pricing power, preventing full cost pass-through. Although improving macroeconomic conditions may support a gradual demand recovery, structural cost and demand risks remain elevated.
The assigned ratings take into account FS’s established manufacturing operations with an integrated billet-to-bar setup, which provides some operational resilience, albeit in a challenging industry environment where demand remains closely tied to cyclical construction activity and public infrastructure spending. The business risk profile of Pakistan’s steel bar sector continues to be elevated due to demand variability, dependence on imported raw materials, exposure to foreign exchange and global commodity price fluctuations, and energy-intensive processes with rising power and fuel costs, which constrain pricing flexibility and profitability. Despite expected gradual demand recovery supported by improving macroeconomic conditions, these structural vulnerabilities persist.
Operational performance in FY25 was impacted by weaker long-steel demand, reflected in lower production and utilization levels. Net sales declined by 24% Y/Y, primarily driven by reduced volumes and softer industry pricing, while gross margins remained stable. Operating margins witnessed a decline, while net margins remained maintained at thin levels supported by lower finance costs in a declining interest rate environment.
The Firm’s financial risk profile exhibits elevated leverage, with gearing and overall leverage remaining high, though marginally improved. Liquidity and coverage indicators are adequate but have weakened somewhat, with a prolonged cash conversion cycle and modest DSCR and FFO coverage. Continued focus on working capital management and improvement in liquidity and coverage metrics will be important for ratings.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk
Applicable Rating Criteria:
Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf