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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Mar-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 Salfi Textile Mills Limited

Rating Type Entity
Current
(30-Mar-19)
Previous
(03-Dec-18)
Action Maintain Initial
Long Term BBB BBB
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

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 and margins. Consequently, Salfi Textile's margins and, in turn, profitability have deteriorated. The financial risk profile of the Company is characterized by moderately leveraged capital structure. However, coverages remain under pressure due to relatively small size of cashflows and high interest rates. The working capital cycle remains stretched. Long association of experienced and professional management team adds comfort. 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 its financial profile via better core 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.

About the Entity
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.

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.