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The Pakistan Credit Rating Agency Limited
Press Release

Date
05-Mar-19

Analyst
Haris Umar
haris.umar@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 AL Textile (Pvt.) Limited

Rating Type Entity
Current
(05-Mar-19)
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The assigned ratings of AL Textile (Pvt.) Limited (AL Textile) reflect strong financial profile of Sponsors and their support to the entity in the form of guarantee and subordinated loan. The Company mainly caters to the need of local market and has developed brand based clientele over the years. The Company's revenue has witnessed growth in harmonization with textile industry in FY18. However, relatively smaller capacity of AL Textile has limited its margins. Recently, the Company's margins and profitability have come under pressure on the back of higher input costs. Moreover, recent withdrawal of custom duty and sales tax on cotton imports, coupled with subsidized utilities for textile industry has improved industry dynamics. While incorporating these factors the Company's expects its business profile to improve in near future. The Company has a adequately leveraged capital structure characterized by weak coverages and high inventory days. The management intends to implement further financial discipline by limiting leveraging.

The ratings are dependent on the Company’s ability to improve its margins and financial profile. Any further reduction in margins, impacting cash-flows and profitability for a long period will impact the ratings. Similarly, prudent working capital management is considered important. Going Forward, sponsors support to the Company would remain critical.

About the Entity
AL Textile commenced its operations in 2003 as a private limited company. The Company has one spinning unit, with 25,200 spindles. Their production facility is located on Main Multan road (43 km), Lahore. AL Textile is a family owned business, with majority stake owned by Mr. Omer Latif (~61%) and the remaining shareholding is distributed equally (~19% each) among his brother and sister.

The Company’s board of directors comprises two members, with Mr. Omer Latif as Chairman of the board. He is also the CEO of the Company, supported by a team of seasoned 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.