The Pakistan Credit Rating Agency Limited
31-Aug-18
Analyst
Farhan Ali
farhan.ali@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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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.