The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Maintains Entity Ratings of Ahmed Fine Weaving Limited

Rating Type Entity
(18-Nov-20 )
(29-Nov-19 )
Action Maintain Upgrade
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings of Ahmed Fine Weaving Limited (Ahmed Fine Weaving) reflect its improving business profile emanating from growth in topline over the last few years led by enhanced exports. Ahmed Fine Weaving is a family-owned public unlisted company with an adequate weaving capacity of 270 Air Jet looms with frequent BMR being done. The Company’s management is cognizant of the textile industry volatility and has planned phase-wise up gradation of machinery to remain competitive. The ownership of Ahmed Fine Weaving rests with the family of Mr. Ashar Fazal including his mother and children. However, The governance framework can be further strengthened. During FY20, the Company managed to marginally increase the topline where pandemic induced lockdowns around the world led to deterioration in revenue as markets both; locally and internationally faced closures. The Company managed to sustain well and clocked higher revenue despite the pandemic situation and imposition of sales tax on the textile sector. The exports experienced an upward trend despite prior lockdowns which provided good contribution to the topline along with enhanced margins. Higher finance costs impacted profitability but coverage remained in comfortable range. Reduction in policy rates and the moratorium relief by SBP provided respite to the whole sector. The markets gradually opened in some parts of the world towards the end of 1QFY21. Going forward, second wave of the pandemic has begun its course and lockdowns may be a cause of concern. However, business community is expected to continue operations under strict SOPs, both; locally and in most of the export destinations of the Company. The Company took the SBP facility of deferment of the principal amount of the long-term loan. The Company enjoys a strong financial profile characterized by good working capital cycle, coverages, and an intermediately leveraged capital structure. The expansion projects have been financed through SBP loans with concessionary rates, which provides comforts
The ratings are dependent on the management’s ability to uphold the entity’s performance trend. Meanwhile, maintaining strong margins and coverages to fulfill financial obligations will remain critical. Improvement in governance framework is considered important.

About the Entity
Ahmed Fine Weaving was incorporated on July 6th, 2012 as a public unlisted company. In January 2016, the weaving segment of the Company was de-merged from 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 270 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 the absence of independent oversight indicates room for improvement in the governance framework of the Company. Mr. Ashar Fazal - the Chairman of the board, is also the CEO of the Company.

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.