Press Release

VIS Reaffirms Medium to Long Term Sukuk Rating of Sitara Chemical Industries Limited

Karachi, April 24, 2025: VIS Credit Rating Company Limited (VIS) reaffirms 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 04th March, 2025.

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). Principal activities of the Company include operating a Chlor Alkali plant, an Oleo Chemical plant for production of caustic soda, liquid chlorine, specialty chemicals, food grade gases, and oleo chemicals. The Company also owns a yarn spinning unit. The registered office of the Company is in Karachi, while the manufacturing facilities are located 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 18-month grace period and quarterly rental payments at the rate of 3M KIBOR+175 basis points (bps). While the security features charge on Company’s assets, the Sukuk structure also provides for cash entrapment via finance payment account (FPA) and collection account (CA). The Sukuk also has call option exercisable, in part or full, after 36 months from the Issue Date with 60-day advance notice to the Sukuk investors.

The assigned rating of the Sukuk is underpinned by a strong security structure alongside the establishment of a FPA and CA, with a waterfall mechanism for repayment prioritization. Assigned ratings also incorporates the medium to low business risk profile of SCIL, supported by 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 including major multinationals further provide comfort to the rating.

The assigned ratings reflect the Company’s financial risk profile in the first half of fiscal year 2025 (1HFY25). Gross margins remained stable, supported by timely adjustments in finished goods prices in response to elevated input costs. Moreover, the Company undertook operational initiatives aimed at optimizing energy expenditures, including deployment of alternative captive power sources and the commissioning of a 1 MW solar power system within the textile division. These measures partially offset the impact of increased tariffs imposed by Faisalabad Electric Supply Company (FESCO). Further, improvement in the coverage profile was noted, primarily on the back of a recovery in funds from operations (FFO), supported by receipt of previously withheld tax refunds. Capitalization metrics remained elevated, reflecting an increase in debt utilization. The additional borrowings were primarily allocated toward expenditures related to the coal-fired power plant (CFPP) project. Liquidity remained stable over the review period, however, it continues to represent a constraint on the 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 .