PACRA Assings Initial Entity Ratings to Mekotex (Pvt.) Limited
The ratings highlight the company's strong business prospects reflected by growing revenues and profitability. The ratings incorporate strong business acumen of the sponsors, making Mekotex group a vertically integrated textile unit, and recent initiatives to strengthen the governance framework. The company is a composite unit of textile from ginning to printing and has diversified from denim to greige fabric. Margins remain inline with good players in the market. The company has adequately invested in BMR and expansion projects to remain competitive and ensuring technological upgrades. This has helped in capturing growing demand in the local market, while export markets are pitched through group businesses - Kam International and Kam Apparel. The financial risk profile is relatively stretched, reflected by adequate coverages since cash flows from recent expansion are yet to fully materialize. Comfort is drawn from sponsors commitment and support, demonstrated in the form of interest-free loan mechanism. The financial matrix is expected to remain well managed. Annual turnover of the group exceeds USD 160mln per annum.
Ratings are dependent upon sustenance of topline growth, capitalizing on ongoing BMR and expansion initiatives, and conversion in profitability. This, in turn, should benefit in better debt service coverage ratios. Improvement in reporting mechanism and governance framework would be critical for the ratings.
Mekotex Pvt. Limited was incorporated in 1991, specializing in denim fabric. In 1993, the company also started producing fabric for home textile. Currently, the company specializes in ginning, spinning, weaving: both denim and Greig fabric, processing and digital printing. The company sells products and offers services at all levels of the textile industry operations cycle. Company operations are supported by 4 ginning machines, 44,000 spindles, 450 looms and 5 digital printing machines. The company is equally owned by 3 brothers: Mr. Khalid Majeed, Mr. Ashraf Majeeed and Mr. Shoiab Majeed directly and indirectly through the family. Mr. Abdul Majid Qasim (late), the father of the family and founder of the group laid its foundation in 1979. Textile operations of the group are segregated into three businesses – Mekotex, Kam International (Home Textile) and Kam Apparel (ready-made garments), making it fully integrated vertical unit. The group has diversified itself into energy and real estate projects, generating a stable stream of income
Mekotex's Board comprises of 5 individuals, of which 3 are sponsors. The company has recently inducted two independent non executive directors on the board. The CEO of the company is Mr Khalid Majeed who looks after the ginning, spinning and finance. Mr Ashraf Majeed oversees the processing, marketing and procurement, while the youngest brother Mr Shoaib Majeed specializes in denim, treasury and taxation.