The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Mughal Iron & Steel Industries Limited

Rating Type Entity
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Positive Positive
Rating Watch - -

Mughal is a known name in the steel industry. The company has diversity in its product slate; Rebars, T-Iron and Girders etc. The company profiling has significantly improved post listing on PSX. Mughal has a large board with two independent directors and has plans to increase the same in line with corporate governance requirements. Mughal has a sizeable capacity to an extent unutilized. The ratings take strength from strong brand value of Mughal Steel in the local industry. The company has attained formidable market share. Demand from retail segment is also earmarked by the management as future growth driver. The ongoing expansion projects of 'Additional power capacity' and 'replacement of BMR mill' etc. will enable Mughal to increase its market presence.

Mughal unlike south players have to incur freight cost – that explains its differential in margins. The ratings incorporate Mughal’s adequate financial risk profile which has sustained over the years. The short term borrowings (net of cash) are largely aligned with the working capital. Going forward, owing to debt driven expansion, the leveraging is bound to increase; however expected to be comfortably managed through healthy cash flows.

The ratings are dependent upon the company’s ability to sustain its business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, strengthening of governance framework is vital.

About the Entity
Mughal Iron & Steel Industries Limited (Mughal), is a public limited company incorporated in 2010 under Companies Ordinance, it is primarily engaged in manufacturing and sale of billets, spring steel, deformed bars, rebars, cold twisted rebars and a range of sections for the downstream industry. The company obtained listing on Pakistan Stock Exchange in Mar-15. The company is majority owned (~75%) by Mughal Family.

The overall control of the Company vests in seven members’ board of directors. Two are executive directors, three are non-executive directors of the sponsoring family, including the chairman, whereas, there are two independent directors on board. Mr. Khurram Javed is the thriving force behind the Company and is leading the business as a CEO. He is supported by a team of qualified and experienced professionals.

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.