The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Upgardes Entity Rating of Mughal Iron & Steel Industries Limited

Rating Type Entity
Action Upgrade Maintain
Long Term A A-
Short Term A2 A2
Outlook Stable Positive
Rating Watch - -

Mughal is a known name in the steel industry. The Company’s business profile has significantly improved, over the last few years. Governance framework strengthened by induction of independent oversight on board. The Company has diversity in its product slate; Rebars, T-Iron and Girders etc. Furthermore, establishment of strong brands like ‘Mughal Supreme’ gives competitive edge to the Company. The company has attained formidable market share by penetrating retail segment. The strategic realignment executed over the last few years by channeling 60% volumes (previous: 10% of sales mix) to retail market has been fruitful. The capacity expansion project, achieving CoD in few months, will further enable Mughal to increase its efficiency and market presence. The reported profitability of FY20 shows Mughal is holding its position. Durable output was reported with the decline in profitability due to increased finance costs. Margins witnessed slight reduction, an industry wide phenomenon, primarily attributable to global increase in prices of raw material (scrap, iron) and depreciation of Pak Rupee. The ratings incorporate the essence of material advancement that the company has achieved in terms of further diversity in revenue streams, which will add not only to the top line but also enhanced profitability, going forward. The management is eying to further improve capacity utilisation for upcoming months. Covid-19 has posed challenges to almost all segments of the economy, worldwide and domestically, where negative implications are being observed on steel sector. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. However, Mughal’s performance is expected to remain strong. The Company is planning to issue a Sukuk of PKR 3,000mln which will be used for meeting working capital requirements. This along with declined key policy rate will result in material savings in upcoming years. Going forward, vigilant management of working capital and proper channeling of additional capacity are essential to support comfortable repayments. The ratings take comfort from decades long association of the sponsor family with steel and allied business.
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.

About the Entity
Mughal Iron & Steel Industries Limited (Mughal), is a public limited company incorporated in 2010, is primarily engaged in manufacturing and sale of billets, girders and rebars. The company obtained listing on Pakistan Stock Exchange in Mar-15. The company is majority owned (~75%) by the Mughal Family. The overall control of the Company vests in the nine members’ board of directors, wherein six are from sponsoring family including the Chairman and the CEO, while three are independent members. During the year, board was reconstituted whereby Ms. Marium Khawar joined the board as an independent director. Mr. Khurram Javed is the driving force behind the Company and is leading the business as a CEO.

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.