logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Jun-18

Analyst
Hamza Ghalib
hamza.ghalib@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 Basfa Textile (Pvt.) Limited

Rating Type Entity
Current
(30-Jun-18 )
Previous
(29-Dec-17 )
Action Maintain Initial
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect adequate business profile of Basfa Textile (Pvt) Ltd. The company is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn. Sponsor’s primary business interest is in car paint and chemical raisins. However, lately they diversified into textile sector i.e. through Basfa Textile. Textile industry in general and spinning industry in particular are exposed to volatility in cotton supply and prices in international market. The situation is perpetrated by high cost of doing business in Pakistan. Consequently, performance volatility, is considered high on standalone basis. However, the recent period has seen improvement for the spinners on back of uptick in product pricing and significant rupee devaluation. The benefit of the same is expected to flow in near term. Company has successfully created it niche market in viscose yarn, which provided stability to the margins, boded well with the overall profitability. Building on these benefits, the management has decided to fully shift to viscose yarn. This strategy is expected to be operational by end-FY19. The Company has minimal long-term debt which keeps the financial risk profile at low level. Short-term borrowing is relied to finance its working capital needs.

The ratings are dependent on sustaining business margins while maintaining financial risk at low level. Governance framework and financial transparency can be improved. At the same time, prudent management of short-term liquidity is considered important.

About the Entity

Basfa Textile (Pvt.) Ltd, incorporated and operational since 2006, is engaged in the manufacturing and sale of Viscos Yarn (Capacity: 34,632 spindles). Viscos yarn is sold under the brand name of “Super-Diamond” and Cotton yarn – under the brand name of “Super-Gold”. The corporate office of the company and plant is located at 36-KM Ferozepur Road, Lahore Basfa Textile’s total power requirement is ~3MW which is being provided by LESCO – with one dedicated line.

The CEO/Chairman, along with other family members collectively own (100%) shares of the company. Board comprises two members including CEO/Chairman and Managing Director. The CEO/Chairman of the company – Mr. Jahangir Saleem is the founder of the group, having overall experience of ~40 years. Mr. Babar Jahangir, the son of the chairman serves - as Managing director of the company. He is responsible for operations of the company and associated with the business for close to a decade, also serves the position on the board.

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.