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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Feb-18

Analyst
Aman Zafar
aman.zafar@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 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.

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.