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The Pakistan Credit Rating Agency Limited
Press Release

Date
06-Aug-20

Analyst
Ateeb Riaz
ateeb.riaz@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of M.Y. Bari Mills (Pvt.) Limited

Rating Type Entity
Current
(06-Aug-20)
Previous
(09-Aug-19)
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Bari Mills is a family owned small scale private company operated by a seasoned business family of Karachi. The Company is primarily an export oriented, towel manufacturing concern. Overall export volumes of towel industry declined by ~10% in FY20 on YoY basis owing to COVID-19 outbreak in early 2020 and subsequent lockdowns in major export destinations (Europe & USA). Domestic players had to shut down production or remained partially operational during lockdown in 4QFY20 as per Government directives. Resultantly, the industry is facing challenges including low demand, build-up of inventory and receivables and lower capacity utilization. Towel industry enjoys relatively better margins that are reflected in the MY Bari's profitability on the back of Pakistan's cotton, which is more suitable for manufacturing towels. However, margins have come under pressure recently owing to increasing input costs. The revenues are expected to remain low due to COVID outbreak and its impact on demand in 4QFY20. The situation has improved to an extent as orders are now being delivered and gradual improvement is seen in international markets after opening of Europe & USA. However, this could be disrupted by second wave of COVID or prolonged slowdown. On standalone basis, the Company’s concentration levels – both customer and geographical – are high with majority of company revenues (~46%) emanates from a single customer. The recent reduction in interest rates and higher portion of SBP's refinance schemes’ borrowings in overall financing mix will lower financial charges, going forward. Bari Mills continues to maintain a moderately leveraged capital structure. Although the working capital cycle of the Company has lengthened recently due to delay of orders, its working capital management remains strong with cushion at trade level available with strong coverages. Going forward, in absence of any further debt-driven expansion in the medium-term, financial profile is expected to further improve.
The ratings are dependent on maintaining optimal operations and top-line amidst prevailing tough conditions. Sustaining margins and reducing customer concentration, while maintaining financial risk at low level is critical. Meanwhile, strengthening of governance framework for better oversight of strategic affairs is considered essential.

About the Entity
M.Y. Bari Mills (Pvt.) Limited (Bari Mills) was incorporated in 2012 as a private limited company. Primary business of the Company is to manufacture and export towels with a total installed capacity of 132 looms. Mr. Haroon Bari owns 20% of shares and the remaining shareholding is evenly distributed among his five sons (16% each).
The BoD comprises five members with Mr. Haroon Bari as Chairman. He brings ~47 years of experience in textile industry with him. The CEO of the Company is Mr. Nabeel Haroon Bari, a graduate from UK in the field of commerce with overall working experience of ~20 years with the group. There is no independent director on the board.

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.