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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 Shujabad Weaving Mills Limited

Rating Type Entity
Current
(28-Jun-19)
Previous
(31-Dec-18)
Action Maintain Initial
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect the adequate business profile of Shujabad Weaving Mills Limited (The Company). The Company benefited from favorable government textile policies, mainly subsidized power cost. The Company’s share of local sales further grew in its sales mix, due to better fabric prices in the domestic market, while exports shrank. Revenues showed limited growth, with margins improving moderately. The Company’s stretched financial profile exhibits its highly leveraged capital structure. The working capital cycle of the Company has increased in recent years and currently stands in line with the industry average. Cash flow from operations and consequently coverages though improved, remained adequate. Going forward, rising interest rates are expected to put further pressure on the Company's financial profile. The Company’s association with Shujabad Group remains a comforting factor.
The ratings are dependent upon the sponsor support, better governance structure and management's ability to improve margins and profitability. Keeping the debt levels manageable and strengthening coverages remains critical.

About the Entity
Shujabad Weaving Mills Limited (The Company) was incorporated in 2005, as a public unlisted Company. The Company has a minimal share in local weaving industry, with 250 looms. The total energy requirement of the Company clocks in at 8.1MW which is met through a mix of captive plant (5.1M.W) and NTDC connection. The Company is owned by three families. Major stake rests with Wahid family (39.7%), followed by Shabbir family (35.4%) and Akram family (25%).

Board of Directors consists of four members and all of them are serving as executive directors, with Mr. Abdul Wahid as Chairman of the board. Two directors represent Shabbir family, including the CEO. The remaining two families have one representative each. Both the Chairman and the CEO have extensive experience in the textile sector, ensuring efficient decision making.

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.