The Pakistan Credit Rating Agency Limited
30-May-19
Analyst
Muhammad Hassan
muhammad.hassan@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of Ahmed Fine Weaving Limited, Assigns Positive Outlook
| Rating Type | Entity | |
|
Current (30-May-19 ) |
Previous (07-Dec-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Positive | Stable |
| Rating Watch | - | - |
The ratings of Ahmed Fine Weaving Limited (Ahmed Fine) reflect its improving business profile emanating from growth in revenues and profitability. Ahmed Fine is a family owned medium scale unlisted public company. The sponsor’s long association with the textile business is considered positive. Recent currency devaluation, coupled with incentives for export-oriented units, has boded well for the core operations resulting in better margins. The management has efficiently strengthened the Company's performance by expanding volumes through continuously investing in BMR acitivities. The expansion projects have been financed through LTFF, with comfortable debt servicing cycle. Longer tenure and competitive rates of underlying debt has enabled the Company to keep the finance cost under control, despite rising interest rates, resulting in high profitability. The Company enjoys strong financial profile characterized by, efficient working capital cycle, healthy coverages and moderately leveraged capital structure.
The ratings are dependent on the Company's ability to sustain its margins and maintain its strong coverages. Any significant deterioration in margins, impacting profitability, in turn, cashflows, will negatively impact the ratings. Improvement in governance framework is considered important.
About
the Entity
Ahmed Fine Weaving Limited (Ahmed Fine), was incorporated on July 6th 2012 as a public unlisted company. In July 2014, weaving segment of the Company was de-merged form Ahmed Fine Textile Mills into Ahmed Fine Weaving Limited. This separation was done through a scheme of arrangements. All assets, liabilities, agreements, arrangements and other matters relating to the weaving business were transferred to and vested in the Company. The Company currently operates with two weaving units with a total of 264 Air Jet looms.
The ownership of Ahmed Fine Weaving rests with the family of Mr. Ashar Fazal including his mother and children. The Company’s board of directors comprises three members. Two members belong to the sponsoring family, while one member is an executive director. Sponsoring family dominance and absence of independent oversight indicates room for improvement in the governance framework of the Company. Mr. Ashar Fazal - the Chairman of board, is also the CEO of the Company.