Press Release

VIS Finalizes Medium to Long Term Sukuk Rating of

Karachi, March 04, 2025: VIS Credit Rating Company Limited (VIS) finalizes medium to long term Sukuk ratings of Sitara Chemical Industries Limited (‘’SCIL’’ or ‘’the Company’’) at 'AA-' (Double A Minus). The medium to long-term rating of 'AA-' denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. Outlook on the assigned ratings has remained at Stable. SCIL has an entity rating of ‘’A+/A2’’ and a ‘’Stable’’ ratings outlook. Previous rating action was announced on June 14, 2024.

SCIL was incorporated in Pakistan in 1981 as a public limited company. The Company is listed on Pakistan Stock Exchange Limited (PSX) and is a Shariah Compliant Company certified by the Securities & Exchange Commission of Pakistan (SECP). The principal activities of the Company include operating a Chlor Alkali plant, an Oleo Chemical plant and a yarn spinning unit. The registered office of the Company is in Karachi, while the manufacturing facilities are in Faisalabad.

SCIL has issued a medium to long term, rated, secured, and privately placed Sukuk of PKR 2.3 bln to finance a new 50-megawatt coal-fired power plant (CFPP). The instrument has a tenor of seven years, including an 18-month grace period and quarterly rental payments at the rate of 3M KIBOR+175 basis points (bps). The rentals shall be paid quarterly. The security structure, features an exclusive hypothecation charge over specified fixed assets, a ranking hypothecation charge over company’s receivables from Collected Customer via a Letter of Hypothecation (LoH). Additionally, lien and right of set off over the finance payment account (FPA) and collection account (CA) is also part of the secuirty. After 36 months from the Issue Date, the Issuer holds the option to buy back all or a portion of the Sukuk Certificates from the Investors at the applicable Buy out Price. The Issuer must provide written notice at least 60 days in advance to exercise this Call Option, which is irrevocable once issued. The buyback can occur in multiples of PKR 1,000,000/- or for the entire Sukuk Certificates. The buyback will take place on a Rental Payment Date, and upon exercising the Call Option, the Issuer will pay the Investors the Buy Out Price as per the Sale Undertaking. If the Call Option is exercised for only certain Sukuk Certificates, the Rental Payments under the Payment Agreement will be adjusted accordingly by the Investment Agent, based on the outstanding Sukuk Certificates. Any amounts received from the Call Option will be applied in reverse order to which they were due and notified to all parties involved.

The assigned ratings of the Sukuk are underpinned by a strong security structure alongside the establishment of a FPA and CA, with a waterfall mechanism for repayment prioritization. Additionally, the call option further supports the assigned ratings.
Assigned ratings also incorporates the medium to low business risk profile of SCIL, supported by its moderate cyclicality, high barrier to entry owing to capital-intensive nature of the industry. A diverse product portfolio also provide assurance to the assigned ratings. Additionally, a strong clientele with major multinationals further provide comfort to the ratings.

The ratings incorporate the Company's financial risk profile in FY24 and 1QFY25, supported by topline growth driven by price adjustments. Gross margin remained stable due to cost optimization, sustaining net margin at normalized levels. Coverage improved primarily due to a PKR 300 mln gross tax refund received by SCIL. Capitalization metrics were stable, while liquidity indicators remained aligned with the assigned ratings.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk









Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .