PACRA Maintains Entity Ratings of Salfi Textile Mills Limited
Salfi Textile Mills Limited – a public listed company – primarily engaged in the manufacturing and sale of different varieties of yarn is majorly owned by Mr. Anwar Tata Family. Tata group currently owns three textile mills i.e. Island, Salfi and Tata Textile Mills Limited. The Group has also diversified into power and food sectors. Spinning industry has recently suffered as lower demand for cotton yarn from China owing to trade war with USA has lead to lower exports volume. Consequently, Salfi Textile's margins and, in turn, profitability have deteriorated, as the Company incurred losses. The financial risk profile of the Company is characterized by moderately leveraged capital structure and weak coverages. The cash flows came under pressure while interest cost remains high. Long association of experienced and professional management team adds comfort. Any further deterioration in margins or sustained losses will affect the ratings negatively. Going forward, management is planning to merge all three textile entities in order to benefit from the economies of scale.
The ratings are dependent on improving margins while maintaining adequate coverages. Meanwhile, prudent management of short term liquidity would be essential. Going forward, materialization of successful merger of all three textile entities would be significant for ratings.
Salfi Textile Mills limited, incorporated in 1968 and a public listed company, is engaged in the manufacturing and sale of different varieties of yarn. In 1984, Tata family acquired the company and took charge of its management. The corporate office of the company is located at Textile Plaza, M.A. Jinnah Road, Karachi, whereas, vicinity of the plants is in Landhi Industrial Estate in the Province of Sindh. The company is operating 2 manufacturing units with a combined capacity of 36,708 spindles.
The CEO, along with other family members and associated company (Island Textile) collectively own majority (~91%) shares of the company. The remaining shareholding is held by mutual funds (~3%) and general public (~6%). The overall control of the Company vests in seven members (board of directors) including the CEO – Mr. Adeel Shahid Tata. Currently, the board comprises of two executive directors, four non-executive, and one independent member. Mr. Anwar Ahmed Tata is the Chairman of the board. He has diverse experience in the field of textile sector, bringing specialized and comprehensive experience and knowledge on the board.