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The Pakistan Credit Rating Agency Limited
Press Release

Date
12-Feb-19

Analyst
Mustafa Hassan
mustafa.hassan@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to Interwood Mobel (Pvt.) Limited

Rating Type Entity
Current
(12-Feb-19)
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect Interwood’s strong brand name and established presence in the furniture industry of Pakistan. Over the years, the Company has mitigated risks associated with contractual jobs by focusing on the retail market. It has been successful in evolving its business portfolio and enjoys a healthy mix between retail and corporate sales. The ratings take into account the Company’s automated production process, national footprint and professional management team. The industry holds promising characteristics on the back of increasing disposable income and growing urban middle class. Recent devaluation of Pakistani Rupee will increase cost of production as a major portion of raw materials are imported. However, the Company can pass some of this cost to consumers as the product becomes more competitive against imported furniture. The ratings are restricted by the Company’s stretched financial profile, characterized by weak coverages, significant leveraging and adequate working capital management. Additionally, governance framework requires strengthening.

The ratings are dependent on the Company’s ability to maintain its leading position in the industry while sustaining margins. Meanwhile, improved financial profile through better coverages, effective working capital management and maintaining sufficient cushion to borrow, to avoid any mismatch in debt profile, will be critical for rating.

About the Entity
Interwood Mobel (Private) Limited was founded in 1974 by Mr. Farooq Ahmed Malik, with a small workshop located in Lahore. The Company primarily deals in the manufacture and sale of furniture and allied items. The Company operates eleven retail outlets concentrated in Lahore (4), Karachi (4), Islamabad (2) and Sialkot (1), with dealer networks established in other cities.

Major shareholding (99.9%) of the Company lies with Farooq Family. Mr. Farooq Ahmed Malik, the founder, and his wife Ms. Ghazala Farooq own 17% and 16% of the Company, respectively. Additionally, their sons, Mr. Omar Farooq and Mr. Ali Farooq, own 33% of the Company each. Remaining shareholding (0.1%) is held by close relatives of the family. The Company is headed by Mr. Omar Farooq, who acts as the Chief Executive Officer. He is ably supported by a professional management team.

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.