The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA updates Entity Ratings of Allawasaya Spinning Mills (Pvt) Limited

Rating Type Entity
(26-Apr-21 )
(30-Apr-20 )
Action Maintain Maintain
Long Term BB+ BB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect the adequate business profile of Allawasaya Spinning Mills (Pvt.) Limited emanating from a relatively small revenue base, low margins, and profitability. The Company manufactures various types of cotton ring and open-end yarn. Despite challenging textile industry dynamics, Allawasaya spinning managed to maintain its volumes. Company does not have a brand-based clientele and all of its output is sold locally in Faisalabad through sales brokers. During 1HFY21, revenues rebounded after challenging fourth quarter of FY20. Hence, quartely profitability observed notable improvement where trend is expected to continue. The company’s financial risk profile remains good. Following the improvement in cash flows, interest and debt coverages along with consistent low leveraged capital structure. Going forward, the planned CAPEX is expected to bring in efficiency gains and improve margins. The Company’s association with an established business family in spinning sector of textile industry provides comfort to the ratings.

The outlook of the Company is 'stable' as the company resumed operations and continued its business fundamentals after resumptions of operations post July20. 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. Textile industry dynamics are prove to challenges posed by third wave of COVID-19 pandemic. Exports front witnessed dilution in last two months of CY21.Trend of exports orders will determine stability in sector’s outlook in the medium term.
The ratings are dependent upon the management’s ability to improve margins, profitability and financial profile of the Company. This includes keeping the debt levels manageable and improve the Company’s competitive position in the industry. Sponsor’s support and business acumen remains important for the ratings.

About the Entity
Allawasaya Spinning Mills Limited started operations in 2004 as a Spinning Mill with an installed capacity of 17,500 spindles. Going forward, Company‘s head office and production facility are located in Multan. The Company is owned by Jamil Family, which also has a major share in Allawasaya Textile and Finishing Mills Limited. Mr. Mian Muhammad Jamil owns, (7%) shareholding in the Company directly and (36%) indirectly through his daughters. Mr. Mian Alamgir Jamil, son of Mr. Mian Jamil owns, (43%) shareholding in the Company directly and (14%) indirectly through his spouse.

The Company has a two-member board, which is entirely comprised of the sponsor family members. Mr. Mian Muhammad Jamil is the Chairman of the board and Mr. Mian Alamgir is the other Executive Director and the CEO of the Company. Both the Chairman and the CEO have vast industry experience and hold directorships in other textile businesses.

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.