PACRA Maintains Entity Ratings of Fazal Weaving Mills Limited

Fazal Weaving Mills Limited (Fazal Weaving), incorporated in 2014, is an unlisted public company, and a wholly owned subsidiary of Fazal Cloth Mills Limited; a group concern of one of the oldest textile groups in Pakistan – Fazal Group (herein; group means "members of family without reference to any law of Pakistan"). The ownership structure provides stability against unfavorable circumstances. During FY20, the Company’s business risk profile was impacted by reduced sales and losses incurred. As per the management, pandemic induced lockdowns around the world led to deterioration in revenue as markets both; locally and internationally faced closures. Volumes, as well as, margins were impacted. High finance cost and significant exchange losses added to the downward pressure. The Company's financial risk profile witnessed squeeze in cash flows, negatively affecting the coverages in the wake of leveraged capital structure. Reduction in policy rates and the moratorium relief by SBP provided respite. The markets gradually opened in some parts of the world towards the end of 1QFY21. The management is of the view that Fazal Weaving will bounce back in FY21; expecting to close figures in profit. Furthermore, the Company is fully booked for the winter season as orders have poured in from local and international clients. Exports are picking up once again and improved results will be seen. Nevertheless, second wave of the pandemic has begun its course and lockdowns may be a cause of concern. However, business community is expected to continue operations under strict SOPs, both; locally and in most of the export destinations of the Company. Moreover, the ongoing merger with the parent Company – Fazal Cloth, is still underway as Court’s final judgment is awaited.
The ratings are dependent upon continuation of irrevocable and unconditional guarantee by the parent company, on financial obligations till completion of the merger. The "Developing" outlook signifies ongoing merger activities. Whereas, the “rating watch” captures the performance deterioration and ramification of the ongoing pandemic. Meanwhile, improvement in margins, in turn, sufficient cash generation to fulfill its financial obligations will remain critical.

About the Entity
Fazal Weaving was incorporated in April, 2014 as a public unlisted company. The Company’s installed capacity is 39,600 spindles. Fazal Weaving is wholly owned by Fazal Cloth. Fazal Cloth is owned by Fazal Group and Fatima Group (~45% each). Fazal Cloth is the Flagship Company of Fazal Group. The Group is involved in manufacturing of yarn and greige fabric. Herein "Group means members of family without reference to any law of Pakistan".

The Company’s board of directors comprises seven members, including the Chief Executive Officer (CEO). The board has four representatives from Fazal Group and three representatives from Fatima Group. Mr. Rehman Naseem – the Chairman – primarily manages the Company operations. He is a Columbia University graduate and carries over two decades of experience in the textile industry.