The Pakistan Credit Rating Agency Limited
28-Jun-19
Analyst
Ateeb Riaz
ateeb.riaz@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of C.A. Textile Mills (Private) Limited
| Rating Type | Entity | |
|
Current (28-Jun-19 ) |
Previous (31-Dec-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | BB+ | BB+ |
| Short Term | A3 | A3 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect modest business profile of C.A. Textile Mills (Pvt.) Limited (C.A. Textile), which improved slightly in harmonization with textile industry. Revenues have started to pick up, benefiting from increase in local sales volumes on the back of recently completed expansion. However, the profitability of the company remains thin as it has lower margins compared to peers. The Company caters to the needs of local industry and has introduced new products including viscose yarn. The withdrawal of zero rated status of textile industry in Finance Bill 2020 coupled with increasing interest rates may put pressure on margins and liquidity across the industry. On standalone basis, the rupee devaluation and rising interest rates will put further pressure on the Company’s margins, as C.A Textile is a net importer. The assigned rating is derived from a low leveraged capital structure and strong coverages.
The ratings are dependent on the Company’s ability to improve its margins and maintain prudent working capital and financial profile. Any negative movement in margins affecting the profitability and cash flows will impact the ratings. Meanwhile, improvement in profitability and governance framework will be favorable for the ratings.
About
the Entity
C.A. Textile Mills (Pvt.) Limited commenced operations in 2002 as a private limited company in Pakistan. The Company’s head office is in Lahore and its plant located in Sheikhupura. It has total installed capacity of 40,560 spindles. C.A. Textile’s majority shareholding rest with Ch. Salamat Ali (63%) and his family (5%). The remaining stake (32%) is held by Ch. Muhammad Atique Ur Rehman Cheema, former Board member of C.A. Textile Mills and a family friend.
The board comprises three executive directors, all from the sponsoring family. Ch. Salamat Ali, the CEO of the Company is also the Chairman of the BoD. The management team comprises seasoned individuals with experience of local textile industry.