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The Pakistan Credit Rating Agency Limited
Press Release

Date
31-Aug-18

Analyst
Farhan Ali
farhan.ali@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 Maqbool Textile Mills Limited

Rating Type Entity
Current
(31-Aug-18)
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect Maqbool Textile Mills Limited's (the company) established track record and association with Maqbool Group, an established group with a presence in textile and seed oil extraction industry. Despite challenging textile industry dynamics, Maqbool Textile managed to maintain its optimal capacity while also expanding its asset base. The commoditized nature of spinning products keeps margins in check due to strong competition in local and international markets. However, recently, the dynamics have changed favourably with rupee devaluation and better pricing of certain products. The company's revenue and margins grew in line with better industry prospects. The margins remain on the lower side when compared with peers resulting in relatively subdued profitability. Maqbool Textile enhanced and revamped its production capacities to be more efficient. The financial profile of the company is constrained due to high leverage and adequate coverages. The debt structure is skewed towards short-term borrowings, which may lead to the asset-liability mismatch.

The ratings are dependent upon the management's ability to improve margins, profitability and financial profile of the company. This includes avoiding any asset-liability mismatch that may arise and effectively manage risks to maintain its position in a competitive segment. Any deterioration in debt coverages leading to higher financial risk or subdued profitability will have a negative impact on ratings.

About the Entity
Maqbool Textile Mills, incorporated in 1989, is a listed company engaged in manufacturing and sales of different varieties of yarn. The company operates three spinning units installed at Muzzafargarh (units I and II) and Tobatek Singh (Unit III), having a total capacity of 70k+ spindles. The company is primarily owned by Maqbool family (72.5%), followed by National investment (9.9%), financial institutions and the general public (17.6%). Maqbool family has interests in other textile mills and in seed oil extraction business.

Overall controls vests with the seven-member board. The board includes 2 non-executive, 2 independent and 3 executive directors. Five board members represent Maqbool family, Mr.Anis Ahmed Sheikh carries with him extensive experience in the textile sector and is supported by an experienced 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.