The Pakistan Credit Rating Agency (PACRA) has maintained the TFC rating of Gulistan Textile Mills Limited at “A-” (Single A minus). The rating indicates a low expectation of credit risk and strong capacity for timely payment of financial commitments.

he rating reflects the company's improving prospects on the back of better margins resulting from lower raw material costs as against FY04, in which GTML's performance was subdued. At the same time, given the almost unchanged cash flow generation, the company has to rely on borrowings to finance increased levels of inventory and trade receivables. The rating also takes into account the strong standing of the Gulistan group and its demonstrated capacity to mobilize requisite funds from external sources provides a degree of comfort to TFC holders.

About the TFC Issue: GTML issued the first secured TFC of PKR.321mln in FY2001 for a tenor of five years. The TFC carries a profit rate of 2% above the State Bank of Pakistan's discount rate, with a floor of 14% and a ceiling of 17.5%. The TFC is secured by way of a first charge ranking parri passu with existing creditors on land, building and plant & machinery, providing 25% margin. The company has serviced its TFC obligations on a timely basis falling due up to September 2004 (current outstanding principal: PKR 213.6mln, final redemption: September 2006).

About the company: Established in 1967, GTML is the largest company – in size – among all the group concerns operating under the banner of Gulistan Group. The company is listed on Karachi and Lahore stock exchanges. It operates four spinning units with an installed capacity of 95,832 spindles, and yarn is sold both locally and abroad. Currently, GTML is one of the leading exporters of yarn, and its manufacturing facilities have capacity to produce a wide range of counts of carded & combed yarn in both cotton as well as blended varieties. The focus of the company's sales is on medium and coarse counts.