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The Pakistan Credit Rating Agency Limited
Press Release

Date
10-Jul-21

Analyst
Maryam Ijaz
maryam.ijaz@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 Rating of Liberty Mills Limited

Rating Type Entity
Current
(10-Jul-21)
Previous
(10-Jul-20)
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Liberty Mills’ ratings reflect strong business profile of the Company emanating from value added textile business and topped up with non-core income from investments. This diversity in revenue stream insulates the Company's profitability to an extent by providing a significant cushion. Liberty Mills, a family-owned textile company, operates in apparel, institutional and home textile segments. The focus of company on established niche of quality-conscious institutional buyers has led to customer concentrations and longevity of relationship with big-name clients in addition to sustained quality that helps manage the risk. The holding company structure of the entity strengthens its profile with investment book constituting ~75% of the equity base. Over the past 3 years, the company has shown an increasing trend in revenues despite COVID-19 outbreak and subsequent cross border lockdown in FY20. The increase in sales of home textile products has benefited the company and resulted in enhanced turnover. The Company’s financial risk profile remains strong, characterized by moderate leveraging and in turn, strong debt-servicing ability. The Company has borrowed loans, both short term and long term in nature at concessionary rates from SBP. This keeps financing costs low and confines the Company from interest rate risk. Ratings also incorporates strong sponsor support augmented by supplementary investment portfolio.
Going forward, Liberty is currently undergoing large scale diversification with 2 upcoming Wind power projects with COD on Dec 31, 2021. Liberty is also in the process of expanding home textile business as well as setting up backward integration. To this end, 152 Acres has been purchased at Nooriabad to set up a master complex from Spinning right upto finished fabric. In the first phase, a brand new weaving unit comprising 144 Air-jet looms is being set up with related infrastructure and ancillary processes along-with Auto Coro Spinning. Phase Two would comprise additional 120 Air-jet looms with expansion in Auto Coro Spinning, if required. Processing and Printing will be set up in Phase Three. Land has already been purchased and Civil works for Weaving and Spinning Mills are in process along with Construction of Residential Colony, Masjid & Market at Nooriabad, Sindh. Plant and Machinery have been procured and are under various stages of shipments, deliveries and installations.
Liberty Group - the sponsor - intends to expand its industrial footing with a diversification philosophy. A number of medium and long-term projects are underway at group- level including (i) Pakistan Aluminum Beverage Cans Limited (ii) Pharmaceutical projects and (iii) Hydro Power projects. Continued utilization of beefed-up capacities is considered critical. Moreover, improvement in governance framework will be favorable for the ratings. Going forward, increase in business size, continuation of dividend/other income stream will be important.

About the Entity
Liberty Mills Limited, established in 1964, is in the business of manufacturing and processing of textile fabrics (capacity: 125mln meters) and made ups (stitching machines: 1,815 machines). The Company is owned by the Mukaty family mainly through individuals. Liberty Group holds ~90% stake in Liberty Power Tech Limited (a 200MW thermal IPP) including ~29% through Liberty Mills. Liberty Mills has eight-member board. The CEO, Mr. Muhammad Ashraf, son of Mr. Salim Mukaty also holds the office of Chairman. The Board comprises of six executive directors and two non-executive directors. Mr. Ashraf is supported by an experienced management team.

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.