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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Dec-18

Analyst
Muhammad Hassan
muhammad.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 Maintains Entity Ratings of Saif Textile Mills Limited

Rating Type Entity
Current
(28-Dec-18)
Previous
(27-Jun-18)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Saif textile mills limited (Saif Textile), a prominent textile venture of Saif Group, is involved in manufacturing and marketing of various varieties of cotton yarn including, melange yarn, dyed yarn, man-made yarn and raw white yarn. Despite challenging textile industry dynamics, Saif Textile managed to maintain its optimal capacity while upgrading its machinery in order to ensure operational efficiencies and eventually higher production volumes. Meanwhile, rupee devaluation has provided a breather to the Company’s margins; even though its export share is relatively small. Re-imposition of custom duties and sales tax on cotton & yarn imports, coupled with increasing interest rates has made it challenging for the local textile industry. The company's margins have consequently been volatile. Going forward, with better efficiency, the management expects the margins to improve and come comparable with peers. The financial profile of the company remains constrained by debt driven BMR thus keeping pressure on coverages and highly leveraged capital structure. The ratings incorporate the experienced management team and the entity’s association with Saif Group, as the Group has demonstrated support in the past.

The ratings are dependent on managing financial obligations while improving business margins. Any further accumulation of debt and/or shift from current business strategy, impacting the risk profile of the entity, may negatively affect the ratings. Going forward, Saif group's support to the entity would remain important.

About the Entity
Saif Textile Mills Limited (STML), incorporated in 1989, is engaged in manufacturing and marketing of different varieties of yarn. The company operates with three spinning units installed at Gadoon Industrial Estate KPK, having total capacity of 100,993 spindles. Saif Textile is also involved in dyeing of yarn, though at small scale. Saif Textile is majorly owned by Saif holdings (49.58%) followed by NIT (7%), State life (4%) and significant free float (39%). Saif Holdings – holding company of Saif group, has interests in Textile, Feeds, Energy, Health, Technology and Real Estate sectors.

Saif Textile's board comprises seven members, including the Chairman - Mr. Osman Saifullah. The board include six non-executive directors., while one director is independent. In recent election the board have been down sized to seven directors, for the purpose one director was removed. Additionally, Mr. Faisal Saifullah Khan joined the board, replacing an existing director. Mr. Zaheen (CEO), carries with him over two decades of experience in textile sector, supported by a team of seasoned professional.

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.