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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Aug-20

Analyst
Raniya Tanawar
raniya.tanawar@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 Master Tiles and Ceramic Industries Limited

Rating Type Entity
Current
(28-Aug-20)
Previous
(30-Aug-19)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings incorporate Master Tile’s emergence as a brand, evident from prevalent market presence, extended production capacity and further ongoing expansion. Master Tiles possesses clear ownership structure, involvement of second generation in business is taking place. Family dominated governance framework, with lack of independent oversight or sub-committees exists, though. The company has established a strong position in its operating segment through suitable marketing strategies, competitive pricing and provision of better quality products to the end consumers. Technological upgrade and installation of new production facilities alongside experienced management team transpire into operational efficiencies. Before the COVID-19 outbreak, local demand for tiles witnessed an up surge on the backdrop of anti-dumping duties levied on imports from China and increased duties / tariffs on imported tiles which bodes well for business prospects of the entity. However, the recent yet ongoing COVID-19 pandemic has dampened the demand side due to the country wide lockdown and later on general slowdown in economic activity. The management anticipates to capitalize the growth opportunity through expansion once the situation gets to normalise. The company has successfully completed third unit, adding to its existing capacity, also reciprocating figuratively. Work on Unit 4 has already started and the entity is working on finalizing the financial structure and modalities of this mega expansion project. At present financial profile reflects a transitional stretch amidst expansion, which is expected to continue for a while, hence prudent management of the associated risks are critical for the ratings. Modalities for the funding of the project are being finalized (with a mix of debt and equity), which will be evaluated in the backdrop of the entity's credit profile.
The ratings are dependent on the company's aptness to manage its liquidity profile while keeping up with its debt obligations. Prudent working capital strategy is an imperative driver to the ratings. Additionally, materialization of expansion venture into better cashflows and stronger margins would be of significance to the ratings. Meanwhile, margin deterioration leading to further dilution of coverages will have negative impact on the ratings.

About the Entity
Master Tiles & Ceramic Industries Limited was incorporated in 1992 as an unlisted public company under the Repealed Companies Ordinance, 1984. The company is a family oriented business involved in the manufacture and sale of a wide range of ceramic, porcelain and granite tiles. The Head Office of the company is located at Hafeeza Tufail Building, Gujranwala.
The Board of Governance includes the CEO - Mr. Mehmood Iqbal and his family members. The Board includes the CEO - Mr. Mehmood Iqbal, his wife, three sons and one daughter. Mr. Mehmood Iqbal's shareholding constitutes ~84% of the total paid-up capital while his wife holds ~3%, his three sons ~4% each and his daughter ~1%. The CEO is a renowned well-versed tiles industry veteran and the pioneer of the business who laid the foundation 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.