logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
25-Apr-18

Analyst
Aman Zafar
aman.zafar@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
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 Reliance Weaving Mills Limited

Rating Type Entity
Current
(25-Apr-18)
Previous
(30-Jun-17)
Action Maintain Upgrade
Long Term BBB BBB
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect sound business profile of RWML. The company is focused on expanding into local markets, while maintaining exports. Over the years, the company has sustained overall margins, wherein, the energy cost remains a key challenge. With recent BMR activities in the weaving segment further efficiencies are expected to flow in. Furthermore, the company plans to enhance the capacity of its weaving segment. FG has parked strategic investment book on RWML's books, some of it provides a stable stream of dividend income, while rest are in development stage; requiring cash. The ratings are constrained by stretched financial risk profile. This is reflected in mismatch in short-term debt vis-à-vis self-liquidating current assets. Limited cashflows – a factor of lower profitability – constrained the coverages. Cognizant of these issues, the management is in process of re-profiling its balance sheet – converting short-term debt into long-term at lower rates, financial risk profile lately. RWML's association with Fatima Group, a growing conglomerate, is a key rating factor.

The ratings are dependent on the management's ability to prudently mange the liquidity and debt profile of the company, particularly working capital, while sustaining business margins and the management’s ability to uphold the entity’s risk profile.

About the Entity
Reliance Weaving Mills Limited, a part of Fatima Group (FG), commenced operations in 1990, and is listed on Pakistan Stock Exchange. The company, with total operating capacity of ~61,920 spindles and 448 air-jet looms, is engaged in manufacturing of yarn and fabric. FG, a leading corporate group in Pakistan, owns majority stake (76%) in RWML. The group has diversified interests in fertilizer, sugar, textile, energy, transmission, packaging, and foreign trade.

The overall control of the company vests in eight-member board, including the Chairmain - Mr. Fawad Ahmed Mukhtar and the CEO - Mr. Fazal Ahmed Sheikh. Seven directors are Fatima Group's family members, while one director is independent. Apart from non-executive Chairman, two of the family directors are in executive roles, while two are directors' spouses. Faisal Ahmed Mukhtar spearheads all functional matters while Mr. Fahd Mukhtar, the other Executive Director, is mainly engaged in marketing. The top management is supported by a team with ample relevant experience in the textile industry.

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.