The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Maintains Entity Ratings of Basfa Textile (Pvt.) Limited

Rating Type Entity
(29-Mar-21 )
(30-Apr-20 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Negative
Rating Watch Yes Yes

The ratings reflect the adequate business profile of Basfa Textile (Pvt) Ltd. The Company is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn. The Company has over the years successfully created its niche market in viscose yarn. The Company being an importer of viscose remains exposed to exchange rate risk. However, the Company was able to pass on the impact of the exchange rate to its customers to an extent. Over the years the Company’s revenue growth pattern has improved but it clocked slightly lesser in FY20 at PKR 2.5bln. Margins of the Company remained stagnant and the net profit of the Company was also in line with the previous year to clock in at PKR 55mln in FY20. The Company has a strong financial profile characterized by low leveraging and good coverages. The Company has a largely cash-based sales model, which requires less working capital financing. As a result, the Company has a positive room to borrow at net trade assets level depicting adequate ability to borrow, if the need arises.
The outlook of the Company is now 'stable' as the company resumed operations and continued its business fundamentals amidst Covid-19. The Rating Watch signifies the prevailing uncertainty due to the ongoing challenges of COVID-19 pandemic. While the business continues to function, there is need to remain vigilant.
The ratings depend on sustaining operations, profitability, and ensuing cash flows. The governance framework and financial transparency need improvement. At the same time, prudent management of short-term liquidity is considered important. Sustaining business margins while maintaining a strong financial profile remains critical.

About the Entity
Basfa Textile (Pvt.) Ltd, incorporated and operational since 2006, is engaged in the manufacturing and sale of Cotton and Viscose Yarn. Viscose yarn is sold under the brand name of “Super-Diamond” and Cotton yarn under the brand name of “Super-Gold”. The corporate office of the Company and plant is located at 36-KM Ferozepur Road, Lahore Basfa Textile’s total power requirement is ~3MW which is being provided by LESCO – with two dedicated lines.

About the Instrument
The CEO/Chairman, along with other family members collectively own (100%) shares of the Company. Board comprises two members including CEO/Chairman and Managing Director. The CEO/Chairman of the Company – Mr. Jahangir Saleem is the founder of the group, having an overall experience of ~40 years. Mr. Babar Jahangir, the son of the Chairman. serves as the Managing Director of the Company. He is responsible for the operations of the Company and has been associated with the business for close to a decade.

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.