The Pakistan Credit Rating Agency Limited
Press Release
a

Rating Action
Lahore: (27-December-2005)
   

PACRA Maintains TFC Rating of Gulistan Textile Mills Limited (GTML)
 

 
Analyst
Sumaira Fazal
(+92-42-586 9504)
sumaira@pacra.com

 

 

 









 

 

 



 

 

 

 

 

Disclaimer
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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.

The rating reflects GTML’s maintained performance trend with declining sales turnover more than offset by increasing margins. While the company’s internal cash flows remained somewhat strained due to working capital requirement, these are expected to improve through increasing earnings in the absence of any major planned capex, thus allowing the company to reduce its reliance on external borrowings, going forward. Meanwhile, the strong standing of the 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 2005 (outstanding principal: PKR 106.8mln, final redemption: September 2006, number of outstanding installments: 2).

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 108,552 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 strategy of continuous balancing, modernization, replacement and expansion (BMR&E) has kept the company competitive despite the changing market dynamics.
 
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