Press Release

VIS Assigns Preliminary Rating to Proposed Short Term Sukuk of Citi Pharma Limited

Karachi, December 16, 2024: VIS Credit Rating Company Limited (VIS) has assigned a preliminary rating of ‘A1(plim)’ (A one preliminary) to the Short-Term Sukuk issue of Rs. 1,500 million of Citi Pharma Limited (‘CPHL’ or the ‘Company’). The short-term rating of ‘A1(plim)’ indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. The entity rating of Citi Pharma Limited is ‘A/A1’ (‘Single A/A One’) with a ‘Stable’ outlook.

Citi Pharma Limited (CPHL) was established on October 8, 2012, and began its journey in the pharmaceutical sector following the acquisition of Askari Pharmaceuticals (Private) Limited (APPL) from the Army Welfare Trust in 2013. This strategic acquisition enabled CPHL to inherit APPL's operations, focusing on the production and distribution of Active Pharmaceutical Ingredients (APIs) and formulation drugs. Transitioning into a public unlisted company in October 2020, CPHL achieved a significant milestone by listing on the Pakistan Stock Exchange on July 9, 2021. Today, it stands as a key player in Pakistan’s pharmaceutical industry, renowned for producing high-quality APIs like Paracetamol. The Company operates across two core segments—APIs and pharmaceutical formulations—supporting the production of Finished Pharmaceutical Products (FPPs) by combining APIs with other essential compounds.

The proposed Sukuk will be privately placed and unsecured, amounting to PKR 1.5 billion, including a green shoe option of PKR 500 million, to meet the Company's working capital requirements. The Sukuk will have a tenor of six months, with profit payable upon maturity on the outstanding principal amount, while the principal will be redeemed as a bullet payment.

The assigned ratings incorporate the low business risk of the API industry, characterized by high demand, low economic sensitivity, and supportive government policies aimed at promoting local production to reduce reliance on imports from India and China. Additionally, high entry barriers, including stringent regulations, lengthy approval processes, and substantial research and development investments, serve to moderate competition in the sector.

The ratings reflect CPHL's sustained topline growth over the years, achieving a 4-year Compound Annual Growth Rate (CAGR) of 37.0%. Margins in the API segment remain relatively low, necessitating higher working capital investment. The Company is strengthening its capabilities through partnerships with global firms such as Murli Krishna Pharma (India) and Hangzhou Newsea Technology Co. Ltd (China). These collaborations aim to enhance API production, incorporate advanced automation, and position the Company for potential expansion into international markets. CPHL is also diversifying into the high-margin formulation segment by developing its own brands and focusing on institutional sales, supported by increased provincial healthcare budgets. Additionally, the Company is expanding its footprint in the nutraceutical export market.

CPHL is addressing industry challenges, such as client and product concentration, by diversifying its portfolio and expanding its customer base. The Company maintains a strong liquidity profile, robust profitability, and sound financial management, with a strategic focus on meeting the pharmaceutical industry's evolving demands. Going forward, the successful execution of these strategies, while sustaining revenue growth and maintaining liquidity and capitalization metrics aligned with the assigned ratings, will remain critical.

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

Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

Applicable Rating Criteria: Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .