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The Pakistan Credit Rating Agency Limited
Press Release

Date
23-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 Maqbool Textile Mills Limited

Rating Type Entity
Current
(23-Aug-19)
Previous
(21-Feb-19)
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Maqbool Textile Mills Limited's (Maqbool Textile) track record and association with Maqbool Group, an established group with presence in textile and seed oil extraction industry. Despite challenging textile industry dynamics, Maqbool Textile managed to maintained its business profile. The commoditized nature of spinning products keeps margins in check due to strong competition in local and international markets. Sales volume remained in line with previous year but is expected to show improvement in near future on the back of recently completed BMR. Subsidized gas rates for textile industry has made the local industry cost competitive though withdrawal of zero rating status will affect liquidity of the industry. The Company remains largely insulated from fallout of sales tax implementation, as it has limited exposure. On standalone basis, recently completed BMR has slightly improved the Company's margins, resulting in better profitability,although they remain relatively low when compared to peers. The Company has a moderately leveraged capital structure and adequate coverages. However, leveraging is expected to decrease after the repayment of long term loans due to recent conclusion of BMR. 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 managing 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 Toba Tek Singh (Unit III), having a total capacity of 79k+ 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.

The board comprises of seven members. Out of this, two directors are non-executive, three directors are executive and two directors are independent. Five board members represent Maqbool family. Mr.Anis Ahmed Sheikh, the CEO, 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.