Press Release

VIS Credit Rating Company Reaffirms Entity Ratings to Archroma Pakistan Limited

Karachi, January 31, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Archroma Pakistan Limited (‘ARPL’ or ‘the Company’) at ‘AA/A-1’ (Double A /A-One) to. Long Term Rating of ‘AA’ reflects high credit quality, strong protection factors, and moderate risk but may vary slightly because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors. Outlook on the assigned ratings is ‘Stable’.

Archroma Pakistan Limited was formed in 2013 from the textiles, paper & emulsions business of Clariant. Clariant itself was formed in 1995 as a spin off from Sandoz, a chemical & pharmaceutical company incorporated in Pakistan and listed on PSX in 1963. Since its inception, i.e. Sandoz, Clariant and now Archroma has been primarily engaged in the manufacture and sales of chemicals, dyestuffs, coating, adhesive and sealants for the textile, paper, construction, and home care industries. Archroma is a global, diversified provider of specialty chemicals operating in over 35 countries and with 26 production sites. Archroma Pakistan Limited is 75% owned by Archroma Textiles GmbH Switzerland. The Company has two production facilities located in Karachi and Jamshoro (Sindh) with a broad range of product portfolio. Overall corporate governance structure of the Company is considered sound.

Assigned ratings incorporates strong parent profile, leadership position in the specialty chemicals market and moderate business risk profile. With majority (~90%) of its offtake emanating from the Brand & Performance Textile (BPT) segment, the Company’s revenue depicts significant sensitivity to changes in its downstream industry i.e. textile. Cognizant of this concentration, the Company’s management is working towards diversification. On a YoY basis, we have not noted any change in proportion of revenue contribution from non-BPT segment. However, as per management as new projects commercialize, the diversification is expected to improve through the rating horizon.

The Company’s high dependence on China for raw materials is a pertinent risk given potential procurement challenges. In addition, the Company is also facing import related challenges, given import curtailment measures undertaken by Government of Pakistan (GoP). The Company does benefit from the Exports and so far has been able to manage its import needs accordingly and also has stock buffer for the next quarter i.e. Q2’MY23. However, any escalation in the aforementioned business challenges may trigger a rating review. Business risk profile incorporates customer concentration, as a result of which exposure to credit risk remains on the higher side. The risk is mitigated by long-term relationships with some of the leading and established players in the industry. In addition, strong distribution partners with over 70 years of relationship also provide the Company with competitive strength.

ARPL’s cash flow coverage indicators remain adequately strong. However, overall financial risk profile is affected by a consistently high payout ratio and increasing trend in gearing, which has exceeded the peer median as of end-MY22. As per management, the payout ratio will be reduced going forward and with increased profit retention gearing is likely to remain limited. Incorporating additional debt mobilization plans of Rs. 1.5b in MY23-24, VIS expects gearing to depict slight increase, albeit it is expected to remain below 0.75x through the rating horizon. The assigned rating remains dependent on maintenance of business and financial risk profile in line with threshold for the assigned rating.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext. 215) or Ms. Faryal Ahmad Faheem (Ext. 306) at 021-35311861-66 or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates (August 2021)
CorporateMethodology202108.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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .