Madiha International (Pvt.) Limited

CREDIT RATING REPORT | Apr-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
03-Apr-25 BB+ A3 Stable Upgrade -
03-Apr-24 BB A3 Stable Maintain -
03-Apr-23 BB A3 Stable Maintain -
14-Sep-22 BB A3 Stable Initial -
About the Entity

Madiha International (Pvt.) Limited was established in 2016 as a private limited Company, registered with the Securities and Exchange Commission of Pakistan (SECP) under the Companies Act, 2017. Headquartered in Karachi, the Company operates as part of a family-owned business group. Ownership is divided among four shareholders, each holding a 25% stake: i) Mr. Usman Saleem Bikiya, ii) Mr. Muhammad Bilal, iii) The remaining 50% is held by other family members.
The Board of Directors (BoD) consists of three members. Mr. Muhammad Bilal, serving as the CEO, oversees the Company’s financial matters and provides external advisory support. Mr. Usman Bikiya is one of the Company's directors.

Rating Rationale

Madiha International (Pvt) Limited (the "Company") is primarily engaged in the import and trading of printer papers. The recent rating upgrade reflects significant topline growth, an expanded customer base, and a low-leverage capital structure. Additionally, the sponsors’ commitment to providing financial support when needed further strengthens the Company’s ratings. With extensive expertise in paper trading, the sponsors have established themselves as key players in Pakistan’s imported paper market. The Country's paper industry consists of commercial importers, manufacturers, and converters. Madiha International is a leading commercial importer, operating under the brand name "BLC, PPC, IK Copy logo". Its supply chain is well-integrated and managed through its dedicated intender, International Business Management. In FY24, the Company reported a robust topline of ~PKR 2,318mln, driven by increased volumetric sales and a strengthened customer base, compared to ~PKR 2,041mln in FY23. Its clientele remains stable, primarily consisting of high-quality corporate clients, including leading banks. Despite challenges such as inflation and import duties, the Company successfully improved its profit margins. The gross profit margin increased from ~9.9% in FY23 to ~10.7% in FY24, while the operating profit margin rose from ~9.4% in FY23 to ~9.9% in FY24.
The Company's financial profile remains solid, with moderate leverage, as it primarily relies on internally generated cash from its sponsors, ensuring financial stability without excessive debt.

Key Rating Drivers

The rating is dependent on sustaining its market share and prudent management of the working capital. While maintaining sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings. Moving forward, improvement in the governance and management framework remains of vital importance.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Madiha International (Pvt.) Limited

rating analysis

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Profile
Legal Structure

Madiha International (Pvt) Limited (“MIPL” or “the Company”) was established in 2016 as a private limited Company registered with SECP under the Companies Act, 2017


Background

The Company is primarily engaged in the import of paper; sizing and trading of printer paper in the local market. The Company has its head office situated in 2nd Floor, Dar-ul-Hanna Bldg. paper market, near New Burhani Hospital, Karachi, Sindh, Pakistan.


Operations

Since its inception, the Company is engaged in the trading of printer papers and providing them to the local industry in Pakistan. The Company is enjoying good market reputation, situated in Sindh, Pakistan mainly in Karachi. All sales of the Company are direct sales and no dealers are involved in the chain.


Ownership
Ownership Structure

MIPL, a family owned business, is owned by four shareholders, each holding a stake of 25%.


Stability

Being part of a group wherein tacit intergroup cooperation exists, bodes well for the rating.


Business Acumen

The owners and directors of the Company have extensive relevant experience and insights concerning the packaging industry owing to their family background. Mr. Muhammad Bilal and Mr. Usman Saleem Bikiya are leading in dynamic ways based on business experience.


Financial Strength

The light assets and the high turnover base model of business have provided strength to the Company to establish its brand name amongst the leading importers of paper and related products in the south market.


Governance
Board Structure

The Board of Directors (BoD) of the Company is composed of four members, each of whom is also an owner of the Company. The Board is Chaired by Mr. Muhammad Bilal, who provides leadership and strategic direction to ensure the Company's continued growth and success.


Members’ Profile

Mr. Usman Saleem Bikiya is an experienced personnel in the field of business, he has been working with the Company since its inception and has made the Company a huge success. Mr. Muhammad Bilal graduated from the USA and has got vast experience in the field of business.


Board Effectiveness

The Board meetings are held on a quarterly basis.


Financial Transparency

The absence of an internal audit function further creates room for improvement in the corporate governance framework. Mushtaq & Co. Chartered Accountants is the external auditor of the Company. The auditor is QCR-rated by ICAP. They have issued unmodified report for the financial year ended on 30 June 2024.


Management
Organizational Structure

The Company has a lean organizational structure divided into three functional departments namely; 1) Sales & Marketing 2) Human Resource 3) Accounts & Finance.


Management Team

Mr. Muhammad Bilal is the CEO of the Company. There are 4-5 levels of hierarchy within each department which shows an adequate management structure.


Effectiveness

The simple management structure facilitates efficient and timely operations. Senior management holds primary control over the company's operations.


MIS

The Company's Management Information System (MIS) generates comprehensive financial reports, on a monthly basis for review by the Board. In addition, MIS also prepares various management reports that provide detailed insights for senior management's assessment. These reports are designed to support informed decision-making by highlighting key performance indicators, financial trends, and operational metrics.


Control Environment

The Company has not appointed any in-house audit team.


Business Risk
Industry Dynamics

Pakistan’s packaging industry consists of four major segments, paper, plastic, tinplate and glass. Paper and plastic segments occupy the major share in total market. Despite, the economic slowdown caused by several issues, demand for the segment remained almost consistent as it falls in the supply chain of various essential products and industries. The segment’s direct costs consist largely of imported raw materials. Chemical wood pulp is one of the main raw materials in the production of paper packaging. Therefore, volatility in exchange rates and international price trends has an impact on costs.The production levels of Paper over the last five years have experienced a CAGR of ~7.2%. This reflects the stability of the segment as it makes up a significant portion of overall Paper and board production. The production of Paper increased in FY24 to ~366,267MT from ~311,675MT in FY23 with an increase of ~17.6% YoY. (Source: PACRA Sector Study)


Relative Position

As per management representation the average market share (in terms of printing paper imports) of the Company remained at ~35% during FY24.


Revenues

In FY24, the Company's revenue increased to PKR 2,318mln, compared to PKR 2,041 mln in FY23. This growth in revenue can be attributed to the rising demand for paper, which drove higher sales volumes and positively impacted overall financial performance. The strong market demand for paper products played a key role in boosting the Company's revenue during the period.


Margins

During FY24, the gross margin of the Company inclined to 10.7% (FY23: 9.9%). The operating margin of the Company clocked in at 9.9% (FY23: 9.4%) due to increased in gross profit clocked at 247mln. The finance cost of the Company remained the same as last year at PKR 47mln (FY23: PKR 47mln). However, the net income of the Company declined by 29% and reported at PKR 29mln (FY23: PKR 41mln) due to increased in direct tax and also addition of income tax expense. Subsequently, the net profit margin stood at 1.3% (FY23: 2.0%).


Sustainability

As per the management, the demand for printer paper in the Banks and other organizations will remain on an increasing trend. Going forward, MIL will generate a healthy net income.


Financial Risk
Working capital

At end-Jun24, the net working capital cycle days increased to 82 days (end-Jun23: 61 days). Furthermore, trade assets of the Company increased to stand at PKR 1,358mln (end-Jun23: PKR 912mln) owing to a higher trade receivable level clocking in at PKR 870mln (end-Jun23: 757mln). The Company’s working capital needs are fulfilled through short-term borrowing clocking in at PKR 727mln (end-Jun23: 352mln).


Coverages

FY24, the Company’s free cash flow (FCFO) stood at PKR 32mln (FY23: PKR 118mln). The Company’s EBITDA stood at PKR 233mln (FY23: PKR 195mln). EBITDA/Finance Cost reported at 5.1x (FY23: 4.4x).


Capitalization

At end-Jun24, leveraging of the Company increased to 88.4% (end-Jun23: 84.1%) owing to a higher increase in the equity base clocking in at PKR 96mln (end-Jun23: PKR 66mln). The borrowings of the Company inclined to PKR 727mln (end-Jun23: PKR 352mln).
 
 

Apr-25

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Madiha International (Pvt.) Limited

financial summary

(PKR mln)

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Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 11 8 5
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 1,466 993 426
a. Inventories 488 155 331
b. Trade Receivables 870 757 26
5. Total Assets 1,477 1,001 432
6. Current Liabilities 654 583 3
a. Trade Payables 648 582 3
7. Borrowings 439 63 271
8. Related Party Exposure 288 288 132
9. Non-Current Liabilities 0 0 0
10. Net Assets 96 66 25
11. Shareholders' Equity 96 66 25
B. INCOME STATEMENT
1. Sales 2,318 2,041 736
a. Cost of Good Sold (2,071) (1,840) (646)
2. Gross Profit 247 201 90
a. Operating Expenses (17) (9) (3)
3. Operating Profit 230 192 87
a. Non Operating Income or (Expense) (4) 0 0
4. Profit or (Loss) before Interest and Tax 227 192 87
a. Total Finance Cost (47) (47) (16)
b. Taxation (150) (104) (63)
6. Net Income Or (Loss) 29 41 8
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 32 118 (41)
b. Net Cash from Operating Activities before Working Capital Changes (15) 70 (56)
c. Changes in Working Capital (379) 22 (290)
1. Net Cash provided by Operating Activities (395) 93 (346)
2. Net Cash (Used in) or Available From Investing Activities (5) (5) (6)
3. Net Cash (Used in) or Available From Financing Activities 375 (51) 355
4. Net Cash generated or (Used) during the period (24) 36 3
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 13.6% 177.3% 115.2%
b. Gross Profit Margin 10.7% 9.9% 12.2%
c. Net Profit Margin 1.3% 2.0% 1.0%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) -15.0% 6.9% -45.0%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 36.7% 86.4% 51.4%
2. Working Capital Management
a. Gross Working Capital (Average Days) 179 113 105
b. Net Working Capital (Average Days) 82 61 103
c. Current Ratio (Current Assets / Current Liabilities) 2.2 1.7 125.7
3. Coverages
a. EBITDA / Finance Cost 5.1 4.4 5.5
b. FCFO / Finance Cost+CMLTB+Excess STB 0.7 2.6 -2.6
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) -20.7 3.9 -2.3
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 88.4% 84.1% 94.1%
b. Interest or Markup Payable (Days) 0.0 0.0 0.0
c. Entity Average Borrowing Rate 8.5% 11.8% 9.8%

Apr-25

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Madiha International (Pvt.) Limited

rating scale

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Apr-25

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Madiha International (Pvt.) Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
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    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

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