PACRA Maintains Entity Ratings of Island Textile Mills Limited

Island Textile Mills Limited – a public listed company - primarily engaged in the manufacturing and sale of different varieties of yarn is majorly owned by Tata Group. Group currently owns three textile mills i.e. Island, Salfi and Tata Textile Mills Limited. The Group has also diversified into power and food sectors. Export oriented spinning industry has recently suffered as lower demand for cotton yarn from China, owing to trade war with USA, has led to lower exports volume. Island Textile enjoys strong margins in comparison to its peers due to its automated plant and ensuing operational efficiencies. The ratings of Island capture the working capital cycle of the Company which is stretched due to increased inventory days. The financial risk profile of the Company has seen some deterioration in the coverages due to prevalence of high interest rate and highly leveraged capital structure. Long association of experienced and professional management team adds comfort. Going forward, management is planning to merge all three textile entities in order to benefit from economies of scale.
The ratings are dependent on sustaining business margins while maintaining financial risk at adequate level. Prudent management of short-term liquidity and leveraging moderation would be rating essentials. Going forward, materialization of successful merger of all three textile entities would be significant to rating.

About the Entity
Island Textile Mills limited (the "Company"), incorporated in 1970, is a public listed company engaged in the manufacturing and sale of different varieties of yarn. Tata family acquired the company in the early 80s and took charge of its management. The corporate office of the company is located at Textile Plaza, M.A. Jinnah Road, Karachi, whereas, vicinity of the plants is in Kotri Industrial Estate in the Province of Sindh. Until 2015, the company was operating with a single manufacturing unit with a designed capacity of 19,200 spindles - Unit 1. However in 2016, in line with the emerging business needs, the company made expansion and installed its second state-of-the-art unit with a capacity of 26,784 spindles – Unit 2. Thereby, total installed capacity of the company is 45,984 spindles.

The CEO, along with other family members collectively own majority (77%) shares of the company. The remaining shareholding is held by mutual funds (7%) and general public (7%). The overall control of the Company vests in seven members (board of directors) including the CEO – Mr. Shahid Anwar Tata. Mr. Anwar Ahmed Tata is the chairman of the board. He has diverse experience in the field of textile sector, bringing specialized and comprehensive experience and knowledge on the board.