PACRA Maintains Entity Ratings of Rustam Towel (Pvt.) Limited

Rustam Towel (Pvt.) Limited (Rustam Towel), a small family run business concern, is a small scale export oriented towel manufacturer. Textile exporters are overall experiencing improved margins due to recent rupee devaluation. Furthermore, towel segment continues to surge forward on the back of Pakistan’s cotton, which is more suitable for making towels. These factors are reflected in the Company's performance as its margins and profitability have improved. On standalone basis, the Company’s concentration levels – both customer and geographical – are well managed with the Company having a policy of capping revenue from single customer to 20%. The Company has improved its working capital management. However, it continues to have negative room to borrow as its short term borrowings exceed trade assets. This mismatch negatively affects the financial profile. Coverages have also shown improvement as free cash flows have increased due to better profitability. Meanwhile, the Company is moderately leveraged and this is expected to remain stable as the Company does not plan to incur long term debt in the future.
The ratings are dependent on sustaining margins while improving business volumes. Meanwhile, prudent working capital management and eliminating mismatch would remain critical. Strengthening of governance framework for better oversight of strategic affairs, and appointment of enlisted auditor with SBP, is considered essential.

About the Entity
Rustam Towel (Rustam Towel) was incorporated in 1995. It is engaged in manufacturing and marketing of different varieties of towel. It has installed vertically integrated manufacturing facilities at Lahore which include 10,000 spindles, 78 looms, dyeing and stitching facilities. Rustam Towel has also installed a new denim manufacturing facility, with an installed capacity of 120,000 pieces per day. The new facility has started production in Aug-19. Rustam Towel is a private company owned by Dogar Family. Mr. Sanaullah, along with his son and three brothers, own the Company.
Rustam Towel's board comprises five members representing Dogar Family. Mr. Sanaullah Dogar, the Chairman and CEO, carries with him over three decades of experience in textile sector. He is supported by his brothers. Mr. Waseem Dogar – youngest brother being the director - largely manages overall day to day affairs of the Company.