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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Jun-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 Saif Textile Mills Limited

Rating Type Entity
Current
(28-Jun-19)
Previous
(28-Dec-18)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Saif textile mills limited (Saif Textile), a prominent textile venture of Saif Group, is involved in manufacturing and marketing of various varieties of cotton yarn including, melange yarn, dyed yarn, man-made yarn and raw white yarn. Despite challenging environment, Saif Textile has managed to maintain its optimal capacity while upgrading its machinery in order to ensure operational efficiencies and eventually higher production volumes. Recent devaluation has considerably eroded the Company’s profitability as its debt includes a portion of dollar based borrowing. This coupled with hiked interest rates has further squeezed the Company’s profitability. Additionally, the financial profile of the Company remains constrained by debt driven BMR thus resulting in highly leveraged capital structure with stretched coverages. Going forward, with better efficiency and specialized product profile, the management expects Saif Textile’s margins to improve and become comparable with peers. The assigned ratings incorporates experienced management team, strong financial muscle of the Sponsors and their willingness to support the Entity. As demonstrated historically in the form of subordinated loans.
The ratings are dependent on managing financial obligations while improving business margins. Any further accumulation of debt and/or shift from current business strategy, impacting the risk profile of the entity, may negatively affect the ratings. Going forward, Saif group's support to the entity would remain critical.

About the Entity
Saif Textile Mills Limited, incorporated in 1989, is engaged in manufacturing and marketing of yarn. The Company operates with three spinning units installed at Gadoon Industrial Estate KPK, having total capacity of 100,993 spindles. Saif Textile is also involved in dyeing of yarn, though at small scale. Saif Textile is majorly owned by Saif holdings (50%) followed by NIT (7%), State life (4%) and significant free float (39%). Saif Holdings – holding company of Saif group, has interests in Textile, Feeds, Energy, Health, Technology and Real Estate sectors.

Saif Textile's board comprises seven members, including the Chairman - Mr. Osman Saifullah. The board include five non-executive directors, one executive director, while one director is independent. Mr. Osman Saifullah – Chairman – holds a post graduate degree in engineering from University of Oxford and post graduate degree in business administration from University of Stanford. The board members have vast knowledge and expertise of textile industry, though diversity in experiences exists as well, ensuring a requisite skill mix for strategic planning.

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.