The Pakistan Credit Rating Agency Limited
21-Feb-20
Analyst
Muhammad Fahad Iqbal
fahad.iqbal@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
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PACRA Maintains Entity Ratings of Maqbool Textile Mills Limited
| Rating Type | Entity | |
|
Current (21-Feb-20 ) |
Previous (23-Aug-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) long 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 increase its capacity to optimize operations and gain economies of scale. The Company added spindles to increase its capacity. The commoditized nature of spinning products keeps margins in check due to strong competition in local and international markets. Recent withdrawal of zero rated status and condition of CNIC has put pressure on the Company's margins; however, sales volume improved substantially on the back of recent increase in capacity. The financial profile of the company is constrained due to adequate working capital and coverages. The debt structure is skewed towards short-term borrowings, which may lead to the asset-liability mismatch. The Company has recently obtained long-term loan under SBP LTFF scheme to finance expansion.
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 Tobatek Singh (Unit III), having a total capacity of 79,440 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 seven members. Out of this, two directors are non-executive, three directors occupy executive role, while 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.