Bikiya Industries (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

Bikiya Industries Private Limited was founded in 2014 with an initial share capital of PKR 50 million. Mr. Saleem Bikiya holds an 80% stake, while his sons, Mr. Usman Bikiya and Mr. Muhammad Bilal, each own 10%. The Company specializes in five key products: i) Pop-up Tissue Box, ii) Toilet Roll, iii) Pop-up Mini Tissue, iv) Hand Towel, and v) Party Pack, catering to a broad customer base. The Board of Directors (BoD) consists of three members, with Mr. Saleem Bikiya serving as the Chairperson.

Rating Rationale

Bikiya Industries Private Limited (the "Company") is a privately owned, family-run business, with Mr. Muhammad Saleem Bikiya as the majority shareholder. Serving as the CEO and Director, Mr. Bikiya brings over 40 years of industry expertise and plays a pivotal role in the Company's operations. The recent rating upgrade reflects key performance improvements, including robust topline growth, a low-leverage capital structure, and product diversification. Within a short span, the Company successfully established the "TUX" brand, solidifying its position as a leading name in the tissue paper market. As per management representation, it ranks among the top five tissue paper players in Pakistan. Expanding beyond its core offerings, the Company has also introduced new food products, demonstrating its commitment to innovation and responsiveness to evolving consumer preferences. This diversification is expected to strengthen its market presence and position it for future growth. A well-integrated supply chain, managed through its dedicated intender, International Business Management, further supports revenue expansion and profitability. In FY24, the Company reported revenue of PKR 2,598mln. Despite challenges such as rising raw material costs due to inflation and exchange rate fluctuations, it successfully improved profit margins. The net profit margin increased from approximately 5.9% in FY23 to 7.7% in FY24, while the operating profit margin rose from 10.6% in FY23 to 11.8% in FY24. These gains contributed to a bottom line of PKR 199mln in FY24. The Company's strong financial performance, resilience in navigating market challenges, and reinforced equity base continue to support its rating.

Key Rating Drivers

The ratings would remain dependent on the Company's ability to sustain the growth in the profitability while strengthening the equity base. Prudent management of the working capital and maintaining sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings.

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

Bikiya Industries (Pvt.) Limited

rating analysis

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Profile
Legal Structure

Bikiya Industries (Pvt.) Limited (or the “Company”) was established in 2014 under the Directorship of Mr. Muhammad Saleem Bikiya.


Background

The Company was established to manufacture tissue papers. The Company is among the top five manufacturers of tissue paper with the brand name "TUX".


Operations

The Company has its head office situated in Karachi. BIL deals in five products; namely: i) Pop-up Tissue Box, ii) Toilet Roll, iii) Pop-up Mini Tissue, iv) Hand Towel, and v) Party Pack. The Company imports raw materials from China, Indonesia, and Malaysia and sells to northern, central, and southern regions of Pakistan. All sales of the Company are direct sales and no dealers are involved in the chain. As of Jun’24, about 55% of the customer base is located in the central region for BIL, with 29% in the northern region and 16% in the southern region. The top-selling product remains Tissue, contributing 95% to total revenue, followed by Paper Cup (4%) and Ispaghol (1%).


Ownership
Ownership Structure

Bikiya Industries (Pvt.) Limited is privately owned by three shareholders: Mr. Muhammad Saleem Bikiy holds 80% shares, Mr. Usman Saleem Bikiya and Mr. Muhammad Bilal 10% each. Mr. Muhammad Saleem Bikiya is the head of family with Mr. Usman Saleem Bikiya and Mr. Muhammad Bilal are sons.


Stability

Mr. Saleem Bikiya demonstrates strong financial commitment during times of need. The group companies Bikiya Industries, Madiha International, and International Business Management support one another by providing long-term loans whenever required.


Business Acumen

The directors associated with the Company have an extensive knowledge of the business practices and Company processes, being associated with the Company for 11 years. The Major shareholder/Director Muhammad Saleem Bikiya has an overall experience of 40 years. The other two shareholders/directors have an accumulative experience of 11 years each.


Financial Strength

The light asset and high turnover base model of business has 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 consists of three members, all of whom are also the principal owners of the organization. The Board is led by Mr. Saleem Bikiya, who serves as the Chairperson, overseeing the strategic direction and governance of the Company.


Members’ Profile

The majority owner/director Mr. Muhammad Saleem Bikiya has an extensive experience of 40 years in paper industry while Mr Usman Saleem and Muhammad  Bilal has 11 Years overall experience.


Board Effectiveness

At Bikiya Industries (Pvt.) Limited,With a Board consisting of only three members, currently the Board has two active committes. 01) Audit committe 02) Human resources and remuneration committe, both of whichare Chaired by Mr. Usman. The Board has only three members and in comparison, to established corporates, the governance model is weak and needs improvement.


Financial Transparency

The Company has appointed Shahid Hussain & Co chartered accountants as auditors. The auditors have expressed an unqualified audit opinion on the financial statements of Bikiya Industries Private Limited for the year ending June 30, 2024. The firm is not QCR rated therefore there is room for improvement in the corporate governance framework.


Management
Organizational Structure

Bikiya Industries (Pvt.) Limited has developed a defined organizational structure considering the Company’s operational needs. The organizational structure is divided into five main functions namely; 1) Sales & Marketing 2) Production 3)Purchase 4) Accounts & Finance, and 5) Collection & Recovery.


Management Team

Mr. Muhammad Saleem Bikiya is the CEO of the Company. He is experienced business person with an experience of more than 4 decades in the relevant field. He is working with the biggest groups in the paper industry including sinarmas group Indonesia known as Asia Pulp & Paper Mr. Farrukh Ejaz is the CFO of the Company and provides external assistance to the Company over financial matters.


Effectiveness

The experience of the sponsors along with a professional management team has helped the Company to streamline its operations. However, Management’s effectiveness and efficiency can be ensured through the presence of management committees.


MIS

To generate MIS and operational reports, the ERP software, SAP Business is being used.


Control Environment

There is no internal audit, the absence of an internal audit department can leave an organization exposed to a variety of risks that could harm its financial standing, reputation, and overall operational effectiveness.


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

Bikiya Industries (Pvt.) Limited maintains a strong market presence in Pakistan for importing tissue paper and hold's a significant share in tissue paper product. Amongst the larger players in the tissue paper industry and market size of ~ 23000 tons/Annum, Bikiya falls under the top five convertors of tissue papers.


Revenues

The Company’s top line shows an decreasing trend due to an decrease in sale price and decrease in prices of products has impacted demand . During FY24, the Company generated a top line of ~PKR 2,598mln (FY23: ~PKR 2,784mln), showing a decline of ~ 6.7% in revenue.


Margins

Tissue paper rolls being used by the Company are 100% imported. So, to maintain the margins, the Company passes on the cost to B2B consumers. In FY24, gross margin  decreased as compared to FY23. The GP margin decreased from ~23.7% in FY23 to ~20.2% in FY24 while the OP margin increased from ~10.6% to ~11.8%. Consequently, the net profit margin also increased from ~5.9% to ~7.7% during the same period. The bottom line of the Company clocked in at ~PKR 199mln during FY24 decreased from ~PKR 303mln during FY23 (FY22: ~PKR 269mln).


Sustainability

The Company is operating at ~84% capacity and has a plan to expand its operations further to capture more market share. The brand name "TUX" has already gotten renowned in the market and has established its foot marks.


Financial Risk
Working capital

Bikiya Industries (Pvt.) Limited experienced a incline in inventory days, increasing from ~37 days at end-Jun23 to ~50 days at end-Jun24. Inventory days are on the higher side because the Company has imported raw materials in huge quantities due to the rise in raw material prices and currency rate fluctuations. The trade receivable days also increased significantly from ~57 days to ~65 days during the same period. Likewise, the trade payable days increased from ~10 days at the end of FY23 to ~15 days at the end of FY24. Consequently, the Company’s net working capital days increased significantly to ~100 days at the end of FY24 from ~84 days at the end of FY23.


Coverages

In FY24, the Company’s EBITDA stood at ~PKR 213mln decreasing from ~PKR 448mln in FY23. As a result in FY24, the Company’s FCFOs stood at ~PKR 343mln decreasing from ~PKR 577mln in FY23; however, this is still a good coverage level for the Company.


Capitalization

The Company has a low-leveraged capital structure. Short-term debt is primarily linked to expansion activities. As a result, the gearing ratio rose from approximately 3.3% at the end of FY23 to around 14.8% by the end of FY24. This increase is attributed to a rise in short-term borrowings (STB), which grew from 0 in FY23 to 185 million during FY24.
 
 

Apr-25

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Bikiya Industries (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 719 229 221
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 1,050 1,134 670
a. Inventories 367 347 218
b. Trade Receivables 385 534 329
5. Total Assets 1,769 1,363 890
6. Current Liabilities 261 206 70
a. Trade Payables 137 76 70
7. Borrowings 224 39 39
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 0 0 0
10. Net Assets 1,284 1,118 782
11. Shareholders' Equity 1,284 1,118 782
B. INCOME STATEMENT
1. Sales 2,598 2,784 2,482
a. Cost of Good Sold (2,073) (2,124) (1,902)
2. Gross Profit 524 660 580
a. Operating Expenses (217) (228) (195)
3. Operating Profit 307 433 385
a. Non Operating Income or (Expense) 1 0 0
4. Profit or (Loss) before Interest and Tax 308 433 385
a. Total Finance Cost (24) 0 0
b. Taxation (85) (130) (115)
6. Net Income Or (Loss) 199 303 269
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 343 577 282
b. Net Cash from Operating Activities before Working Capital Changes 367 577 282
c. Changes in Working Capital 123 (559) (287)
1. Net Cash provided by Operating Activities 490 19 (5)
2. Net Cash (Used in) or Available From Investing Activities (503) (23) 0
3. Net Cash (Used in) or Available From Financing Activities 0 0 0
4. Net Cash generated or (Used) during the period (13) (4) (5)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -6.7% 12.2% 386.6%
b. Gross Profit Margin 20.2% 23.7% 23.4%
c. Net Profit Margin 7.7% 10.9% 10.9%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 17.9% 0.7% -0.2%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 16.6% 31.9% 62.0%
2. Working Capital Management
a. Gross Working Capital (Average Days) 115 94 76
b. Net Working Capital (Average Days) 100 84 61
c. Current Ratio (Current Assets / Current Liabilities) 4.0 5.5 9.6
3. Coverages
a. EBITDA / Finance Cost 8.9 N/A N/A
b. FCFO / Finance Cost+CMLTB+Excess STB 14.3 N/A N/A
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.1 0.1 0.1
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 14.8% 3.3% 4.7%
b. Interest or Markup Payable (Days) 0.0 N/A N/A
c. Entity Average Borrowing Rate 18.3% 0.0% 0.0%

Apr-25

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Bikiya Industries (Pvt.) Limited

rating scale

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Apr-25

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Bikiya Industries (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))
  7. Proprietary Information
    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.

Apr-25

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