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The Pakistan Credit Rating Agency Limited
Press Release

Date
07-May-21

Analyst
Muhammad Fahad Iqbal
fahad.iqbal@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 the Entity Rating of AL-Textile (Pvt.) Limited

Rating Type Entity
Current
(07-May-21)
Previous
(21-May-20)
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Negative
Rating Watch Yes Yes

The assigned ratings of AL Textile (Pvt.) Limited (AL Textile) reflects the adequate financial profile of Sponsors and their support to the entity. The Company mainly caters to the need of the local market and has developed brand-based clientele over the years. The Company’s revenue and profitability witnessed improvement in 9MFY21. The relatively smaller capacity of AL Textile has limited its margins. Recently, the Company's margins and profitability have improved, leading to net profit. The imposition of sales tax on local sales had a negative effect on local demand. The Company has a moderately leveraged capital structure characterized by good coverages and moderate inventory days. The financial matrix observed improvement after the conversion of the director’s loan into equity. The ratings take comfort from the explicit commitment of sponsors to provide support to the Company.
The outlook of the Company is now 'stable' as the Company’s performance rebounded along with improvement in leveraging. The Rating Watch signifies the prevailing uncertainty due to the ongoing challenges of the COVID-19 pandemic. While the business continues to function, there is a need to remain vigilant. Furthermore, Textile industry dynamics are prone to challenges posed by the third wave of the COVID-19 pandemic. The country’s textile group exports, however, have witnessed 9.06% growth during the first nine months (July-March) 2020-21. The trend of export orders will determine stability in the sector’s outlook in the medium term.
The ratings depend on sustaining operations and profitability. Meanwhile, prudent working capital and cashflows management remains critical in prevailing circumstances. Going forward, sponsors' support to the Company would remain critical for the ratings.

About the Entity
AL Textile commenced its operations in 2003 as a private limited company. The Company has one spinning unit with 25,200 spindles. Their production facility is located on Main Multan road (43 km), Lahore. AL Textile is a family-owned business, with a majority stake owned by Mr. Omer Latif (~61%) and the remaining shareholding is distributed equally (~19% each) among his brother and sister.

The Company’s board of directors comprises two members, with Mr. Omer Latif as Chairman of the board. He is also the CEO of the Company and is supported by a team of seasoned professionals.

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.