The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Maintains Entity Ratings of Maqbool Textile Mills Limited

Rating Type Entity
(20-Feb-21 )
(21-Feb-20 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Maqbool Textile’s long track record and association with Maqbool Group, an established group with a presence in the textile and seed oil extraction industry. Maqbool textile is a family-owned public listed company with an installed spinning capacity of ~89,000 spindles with frequent BMR being done to replace relatively old spindles. The commoditized nature of spinning products keeps margins in check due to strong competition in local and international markets. During 1HFY21, the Company managed to marginally increase the topline where pandemic induced lockdowns around the world led to a deterioration in revenue as markets both; locally and internationally faced closures. However, due to higher finance cost, the coverages of the Company remained towards lower level. Reduction in policy rates and the moratorium relief by SBP provided respite to the whole sector. The Company took the SBP facility of deferment of the principal amount of the long-term loan. The financial profile of the company is constrained due to adequate working capital and coverages have room for improvement. The debt structure is skewed towards short-term borrowings, which may lead to the asset-liability mismatch. The Company has recently obtained a long-term loan under the SBP LTFF scheme to finance BMR.
The ratings are dependent upon the management's ability to improve margins, profitability, and financial profile of the Company. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any deterioration in debt coverages leading to higher financial risk or subdued profitability will have a negative impact on ratings.

About the Entity
Maqbool Textile Mills, incorporated in 1989, is a listed company engaged in manufacturing and sales of different varieties of yarn. The Company operates three spinning units installed at Muzzafargarh (units I and II) and Tobatek Singh (Unit III), having a total capacity of ~89,000 spindles. The Company is primarily owned by the Maqbool family (72.5%), followed by National investment (9.9%), financial institutions, and the general public (17.6%). Maqbool family has interests in other textile mills and in the seed oil extraction business.

About the Instrument
The board comprises seven members. Out of this, two directors are non-executive, three directors occupy the executive roles, while two directors are independent. Five board members represent the Maqbool family. Mr. Anis Ahmed Sheikh, the CEO, carries with him extensive experience in the textile sector and is supported by an experienced management team.

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.