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The Pakistan Credit Rating Agency Limited
Press Release

Date
29-Aug-19

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 Maintains Entity Ratings of Ahmed Fine Textile Mills Limited

Rating Type Entity
Current
(29-Aug-19)
Previous
(28-Feb-19)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Ahmed Fine Textile Mills (Ahmed Fine) association with renowned business groups of Pakistan – jointly owned by Fazal Group and Hussain Group. The Company is primarily engaged in the spinning business and also has presence in weaving segment through a wholly owned subsidiary – Fazal Rehman Fabrics Limited. The ratings incorporate improved business performance of the Company on the back of prudent inventory procurement, resulting in notably higher margins in first two quarters, eventually resulting in better margins for FY19. Meanwhile, significant rupee devaluation and subsidized utilities for textile industry has made the local textile industry cost competitive. Ahmed Fine's financial profile is considered strong reflected by (i) efficient working capital cycle, (ii) strong coverages, and (iii) moderately leveraged capital structure. Additionally, the Company is in possess of enhancing its capacity, which will increase its leveraging. However, the loan will be availed on SBP's concessional rate. Going forward, high interest rate environment, coupled with withdrawal of zero rating status and restriction on sales to unorganized sector will have a restraining impact on local textile industry.
The ratings are dependent on sustaining business margins while maintaining a sound financial profile with strong coverages and manageable leveraging. The Company’s ability to generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

About the Entity
Ahmed Fine Textile Mills Limited (Ahmed Fine), incorporated in 1989, is engaged in manufacturing and marketing of different varieties of yarn. The company operates one spinning unit having 45,888 spindles, manufacturing coarser-count yarn. Power requirement stands at 6MW; met through captive sources. Initially, Fazal Group, Fatima Enterprise, and Hussain Group - had joint ownership of the company. Post-demerger, Fazal Group and Hussain Group has acquired 50% stake (each) in the company. Fazal Group has interests in Textile, Fertilizer, Energy, and Real Estate sectors while Hussain Group has key interest in Textile sector.

Overall control vests with seven members BoD. Four directors represent Fazal Group while three are representatives of Hussain Group. Management control vests with Fazal Group. Mr. Rehman Naseem, the CEO, carries with him over two decades of experience in textile sector. He is supported by a team of seasoned professionals, supplementing his capabilities.

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.