PACRA Assigns Initial Entity Ratings to Zafa Pharmaceuticals (Private) Limited

Lahore, September 14, 2023 (PPI-OT): ZAFA Pharmaceutical (the “Company”) is a domestic player, claiming a prominent position amongst the local players. It specializes in the formulation development, manufacturing, testing and marketing of a wide range of quality, affordable medicines. The Company’s manufacturing facilities, are the few dedicated facilities for the manufacturing of Beta-Lactam and Cephalosporin products. ZAFA’s top 5 products include Folic Acid tablets, Famila Injection, Zodip tablets, Xynosine Nasal Spray and Ciprofloxacin HCL, these contribute ~21% of total revenue. Presently, ZAFA holds a market share of 30-35% in terms of units in the folic acid market.

The company is driven by its vision to offer economically and affordably priced high-quality healthcare products to the public, at significantly lower costs compared to its competitors. The Board comprises experienced and professional experts, its size is considered adequate. Global inflation, high logistics cost and massive PKR depreciation have impacted the pharma sector negatively. The Company has grown and augmented its position and is seen fortifying its production capabilities and product range. In the coming years, some new products are also in the pipeline. The financial risk profile of the company is strong with comfortable coverages and cashflows.

During 9MFY22, the gross margin of ZAFA remained 36.0% (CY22: 37.2%, CY21: 37.9%). Despite the significant inflationary impact and increased operating expenses, the operating margin remained 20.7% during 9MFY23 (CY22: 8.3%, CY21: 10.6%, CY20: 11.5%). ZAFA has shown an increase in its net margin during 9MFY23 at 20.2% (CY22: 4.2%, CY21: 6.2%) mainly because of decline in finance cost. The debt on the books of ZAFA comprises mainly short-term borrowings of PKR 319mln and long-term borrowings of PKR 85mln during FY22. In CY22, the leverage ratio stood at 19.8% during 9MFY23 (CY22: 17.5%, CY21: 13.6%). The Company has an equity base of PKR 3,797mln during 9MFY23 (CY22 2,974, CY21 2,769).

The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative. Further improvement in governance structure remains important for the ratings.

For more information, contact:


The Pakistan Credit Rating Agency Limited (PACRA)

Awami Complex, FB1, Usman Block New Garden Town,

Lahore, Pakistan

Tel: +92-42-5869504-6

Fax: +92-42-5830425

Email: hammad.rashid@pacra.com

Website: www.pacra.com

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