Press Release

JCR-VIS Assigns Initial Ratings of AA-/A-1 to Novatex Limited

Karachi, September 25, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Novatex Limited (Novatex). Outlook on the assigned ratings is ‘Stable’.

Novatex operates as an unlisted public limited company under the Gani and Tayub (G&T) group of companies; the group has been in existence for over six decades with presence in various sectors including textile, plastic resin and power generation. Incorporated in 1997, Novatex Limited manufactures PET resins, PET preforms and BoPET films. Shareholding of the company is held by the G&T family with remaining shares held by Gatron Industries Limited.

The assigned ratings to Novatex incorporate the company’s dominant market position and diversified operations in a growing demand segment yielding low business risk and healthy financial risk profile. The company enjoys leading market position in the PET Resin segment; Novatex along with Gani & Tayub group enjoys leading market share in PET Preform and BOPET Films segment. Ratings also reflect the sound financial and professional profile of the company’s management.

Business risk profile is supported by diversified local and international operations (three business segments and exports to 45 countries), healthy growth outlook for fast moving consumer goods and pharmaceutical sector (recently diversified) and focus on service quality, innovation & product development resulting in strong client relationships. Novatex is also in the process of diversifying in the power sector through Thalnova Power Thar (Private) Limited (TNPTL), a joint venture between Thal Limited and Novatex, which is a 330MW coal fired power plant at Thar coal mine mouth Sindh.

Financial risk profile of the company is supported by improving profitability levels and healthy cash flows in relation to outstanding obligations. Gearing levels have declined on a timeline basis and have historically remained within manageable levels. With raw materials representing a major cost component and significant volatility in prices (oil & natural gas), efficient procurement, inventory management and product pricing are critical to gross margins and cash flow metrics. After successfully completing expansion in the PET Resin segment in FY16, Novatex is in the process of enhancing capacity in the Preform and BoPET segment. Given the envisaged future expansion & funding plan, the liquidity and capitalization indicators are projected to remain within benchmarks for the assigned ratings.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited