PACRA Maintains Entity Ratings of C.A Textile Mills (Pvt.) Limited, Assigns 'Rating Watch'

The ratings reflect the modest business profile of C.A. Textile Mills (Pvt.) Limited (C.A. Textile), involved in the manufacturing of cotton and viscose yarn. The Company's revenues have shown growth over recent years, benefiting from increase in local sales volumes on the back of recently completed expansion. The Company caters to the needs of local industry and has introduced new products including viscose yarn. However, with the withdrawal of zero-rated status of the textile sector since Jul19, sales to unregistered customers have become a challenge. Amidst COVID-19 outbreak and subsequent lockdown, the Company had to face complete shutdown of their operations in line with the provincial Government’s directive of lockdown. Thus, the Company's profitability is expected to suffer in current circumstances. The Company's financial risk is considered adequate characterized by moderate leveraging and coverages.
The Rating Watch indicates the prevailing uncertainty due to the outbreak of COVID-19 pandemic. This has impacted the entire textile chain as demand contracts due to shutdown in domestic and global markets and tough economic conditions. The Company's operations are expected to resume from the start of June, however, full resumption of operations and demand will remain important for the sustainability of the Company. PACRA is closely monitoring the situation and will take rating action accordingly.
The ratings are dependent on sustaining business performance amidst prevailing tough conditions. Full resumption of operations and maintaining strong financial profile amidst lower revenues is critical. Meanwhile, improvement in 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.