The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Ibrahim Fibres Limited

Rating Type Entity
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect IFL’s (i) robust ownership profile (Ibrahim group) that has demonstrated strong support, (ii) leading market position in the local polyester staple fibre (PSF) industry, and (iii) intentions to keep leveraging at low levels. Imposition of anti-dumping duty on PSF imported from China since Feb-16 has supported volumetric growth and margin - performance has also gained from increasing demand. Adverse movements in crude oil prices, and, PSF feedstock prices were set off by volumetric increase in sales, providing benefit to the company’s core margins. Given demand pattern and efficient production, IFL is expected to hold performance trend. In recent years, the company’s bottomline had been a function of a reliable dividend stream of IFL's investment in Allied Bank Limited (ABL), an associated company. Lately, the said investment was sold to the group holding company. Though the recurring stream of income from ABL stopped, the resulting cash flows were primarily used to adjust debt levels. In turn, significant financial cost savings. Meanwhile improved core profitability would bode well for its financial profile.

The ratings are dependent on profitable operation of the company, supported by input prices and duty protection. Moreover, association with Ibrahim Group bodes well for the company. Going forward, induction of independent board members should benefit governance framework.

In order to formalize its corporate structure, sponsors of Ibrahim Group established a holding company – Ibrahim Holdings (Private) Limited (IHL). The new structure envisages consolidation of investments in IFL and ABL at holdco level, thus changing ownership and investment structure of investee companies. ABL’s ownership has been restructured as per plan, with restructuring of the group’s investment in IFL (currently via individuals) to follow. Nevertheless, sponsors remain committed to support IFL if need arises; the holdco structure should provide a convenient mechanism.

About the Entity
IFL, incorporated in 1986 and listed on Pakistan Stock Exchange, is engaged in the production & marketing of PSF and yarn. The production facilities are located at Shahkot near Faisalabad; these facilities include current annual production capacity of 390,600 tons for PSF and 139,872 spindles for Yarn. The company envisages building a sizeable spinning complex in the long-term. Ibrahim Group holds majority stake (88%) in IFL through sponsoring individuals.

IFL's board of directors comprises seven members, including the CEO, Mr. Mohammad Naeem Mukhtar. In addition to the CEO, there are two directors from the sponsoring family, three IG affiliates, and one independent member. All board members have significant industry related experience.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.