Lahore, The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the entity ratings of H. Sheikh Noor-ud-Din and Sons (Private) Limited (HSNDS), reflecting the company's strong financial performance and growth trajectory. The upgrade moves the long-term rating from BBB to BBB+ and maintains the short-term rating at A2, with a stable outlook for both.

According to The Pakistan Credit Rating Agency Limited, the upgrade is a testament to HSNDS's significant growth and robust financial health. The company, a key manufacturing and production arm of NRS Relief, specializes in the production and sale of innovative relief products, including tents, tarpaulins, canvas, mosquito nets, and other items for humanitarian organizations. The rating upgrade follows a family transaction completed at the end of 2023 that resulted in changes to the company's ownership structure but affirmed the strong industry-specific knowledge and expertise of its sponsors.

HSNDS has demonstrated commendable growth, with a 196% year-over-year increase in its top line, largely driven by successful bids for new contracts with international relief agencies. This growth has come in response to the rising global demand for relief equipment due to recent global conflicts and natural calamities. While the company’s gross profitability margin saw a slight dilution, its net profitability margin significantly increased due to complete deleveraging, leading to a reduction in finance costs and a substantial increase in the bottom line.

The company's improved financial risk profile, attributed to the deleveraged capital structure following the repayment of its entire debt portfolio, played a crucial role in the rating upgrade. Improved working capital management and healthy cash flows during the year further supported this enhancement. The ratings also consider the company's long-term associations with international donor agencies such as the UN, UNHCR, UNICEF, and the Red Cross, alongside adequate support from sponsors and other group businesses.

For the future, PACRA notes that maintaining a deleveraged capital structure and sustaining the growth trajectory in sales volumes and profitability are crucial for the sustainability of the upgraded ratings. The agency also points out that the sustainability of the ownership structure, governance, sales volumes, and margin stability remain critical for the ratings, highlighting that any deterioration in coverages and cash flows could impact future assessments.