The Pakistan Credit Rating Agency Limited
09-Aug-19
Analyst
Silwat Malik
silwat.malik@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 Interwood Mobel (Private) Limited
| Rating Type | Entity | |
|
Current (09-Aug-19 ) |
Previous (12-Feb-19 ) |
|
| Action | Maintain | Initial |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect Interwood’s strong brand name and established presence in the furniture industry of Pakistan. Over the years, the Company has mitigated risks associated with contractual jobs by focusing on the retail market. It has been successful in evolving its business portfolio and enjoys a healthy mix between retail and corporate sales. The ratings take into account the Company’s automated production process, national footprint and professional management team. Recent devaluation of Pakistani Rupee will increase cost of production as a major portion of raw materials are imported. However, the Company has passed some of this cost to consumers as the product becomes more competitive against imported furniture. The ratings are restricted by the Company’s stretched financial profile, characterized by weak coverages, significant leveraging and adequate working capital management. Additionally, governance framework requires strengthening.
The ratings are dependent on the Company’s ability to maintain its leading position in the industry while sustaining margins. Meanwhile, improved financial profile through better coverages, effective working capital management and maintaining sufficient cushion to borrow, to avoid any mismatch in debt profile, will be critical for rating.
About
the Entity
Interwood Mobel (Private) Limited was founded in 1974 by Mr. Farooq Ahmed Malik, with a small workshop located in Lahore. The Company primarily deals in the manufacture and sale of furniture and allied items. The Company operates thirteen retail outlets concentrated in Karachi (5), Lahore (3), Islamabad (3), Sialkot (1) and Peshawar (1), with dealer networks established in other cities.
Major shareholding (99.9%) of the Company lies with Farooq Family. Mr. Farooq Ahmed Malik, the founder, and his wife Ms. Ghazala Farooq own 17% and 16% of the Company, respectively. Additionally, their sons, Mr. Omar Farooq and Mr. Ali Farooq, own 33% of the Company each. Remaining shareholding (0.1%) is held by close relatives of the family. The Company is headed by Mr. Omar Farooq, who acts as the Chief Executive Officer. He is ably supported by a professional management team.