The Pakistan Credit Rating Agency Limited
28-Feb-18
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Rating Methodology | Jul-17
- Methodology | Correlation between long-term and short-term rating scale | Jun-17
- Methodology | Criteria Modifiers | Jun-17
Related Research
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PACRA Maintains Entity Ratings of Ahmed Fine Textile Mills Limited
| Rating Type | Entity | |
|
Current (28-Feb-18 ) |
Previous (26-Jan-17 ) |
|
| Action | Maintain | Initial |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect adequate business profile of Ahmed Fine Textile Mills – jointly owned by Fazal Group and Hussain Group. The company, is engaged primarily in spinning business and also has presence in weaving segment through a wholly owned subsidiary – Fazal Rehman Fabrics Limited. The growth in topline of the company has remained limited due to low exports; turnover in local market is impressive. Low margins of the company are inline with struggling spinning sector due to high local cotton prices and ban on import of cotton from India. However, duty on import of yarn and recent export package has provided a breather to the industry. Ahmed Fine's financial risk is strong reflected by (i) relatively efficient working capital cycle, (ii) healthy coverages, and (iii) moderately leveraged capital structure. Going forward, in absence of any debt-driven expansion in the medium-term, financial risk is expected to remain at the same level. The ratings also incorporate the experienced management team and the entity’s association with Fazal Group. This should bring improvement in overall governance structure of the Group in future.
The ratings are dependent on sustaining business margins while maintaining financial risk at low level. Any shift from current business strategy, impacting the risk profile of the entity, may negatively affect the ratings.
About
the Entity
Ahmed Fine Textile Mills Limited (Ahmed Fine), incorporated in 1989, is engaged in manufacturing and marketing of different varieties of yarn.The company operates one spinning unit having 45,888 spindles, manufacturing coarser-count yarn. Power requirement stands at 6MW; met through captive sources. Initially, Fazal Group, Fatima Enterprise, and Hussain Group - had joint ownership of the company. Post-demerger, Fazal Group and Hussain Group has acquired 50% stake (each) in the company. Fazal Group has interests in Textile, Fertilizer, Energy, and Real Estate sectors while Hussain Group has key interest in Textile sector.
Overall control vests with seven members BoD. Four directors represent Fazal Group while three are representatives of Hussain Group. Management control vests with Fazal Group. Mr. Rehman Naseem, the CEO, carries with him over two decades of experience in textile sector. He is supported by seasoned management team.