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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Dec-18

Analyst
Muhammad Hassan
muhammad.hassan@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 Assigns Initial Entity Ratings to Allawasaya Spinning Mills (Pvt.) Limited

Rating Type Entity
Current
(28-Dec-18)
Action Initial
Long Term BB+
Short Term A3
Outlook Stable
Rating Watch -

The ratings reflect the company's small size, low margins and limited profitability, and modest business profile. Lately, revenues have started to pick up, benefiting from increased demand and better pricing. However, margins remain on the lower side when compared to peers. The company caters to the needs of the local industry and provides different varieties of yarn to improve margins and competitive positioning. The Company has a low leveraged capital structure with moderate coverages. In line with better industry prospects, the company is planning to increase its asset base by adding more spindles, with a view to make efficiency gains, improving the overall margins. The sponsors have demonstrated support in the past.

The ratings are dependent upon the company's ability to improve its margins, in turn, profitability and maintain prudent working capital and financial profile. Any negative movement in margins and/or cash flows will negatively impact the ratings. The governance framework needs strengthening.

About the Entity
With the installed capacity of 17,500 spindles as a single unit, the company started operations in 2004 as a spinning mill. The company’s head office and production facility are located in Multan. The company ownership lies with the “Jamil family” with Mian Jamil controlling (39%) and his son Mian Alamgir Jamil controlling (61%).

The two-member board comprises of sponsors with Mian Muhammad Jamil acting as the Chairman and Mian Alamgir as the other executive director. Mian Alamgir is the current CEO of the company and has been associated with the textile business since 2002. The Chairman, Mian Jamil, carries 45 years of textile industry experience, both the CEO and Chairman hold directorships in other textile businesses as well.

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.