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The Pakistan Credit Rating Agency Limited
Press Release

Date
04-Aug-21

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@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 Interwood Mobel (Private) Limited

Rating Type Entity
Current
(04-Aug-21)
Previous
(07-Aug-20)
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Interwood Mobel (Private) Limited’s (Interwood Mobel or 'the Company') reputable brand name and established presence in the furniture industry of Pakistan. Over the years, the Company has mitigated risks associated with contractual jobs by focusing on the retail market. It has been successful in evolving its business portfolio and enjoys a healthy mix between retail and corporate sales. The ratings take into account the Company’s automated production process, national footprint and professional management team. The operations of the industry have been impacted due to spread of COVID-19 pandemic and subsequent countrywide lockdown. The demand for retail segment has been impacted due to closure of retail markets. However, during FY21 the Company managed to increase its top-line with increased online sales and contractual sales. The diversified product and segment mix bodes well for the Company in these circumstances. The Company enjoys healthy margins on the back of targeting mid to high end market segments. The Company invested considerably to acquire latest manufacturing technologies to achieve operational efficiencies and to reduce overheads. These are essential given the competition encountered by the Company from largely unregulated market participants and continuous increase in input costs on the back of frequent rounds of rupee depreciation as the Company imports majority of its raw materials. The financial profile of the Company is characterized by moderately leveraged capital structure, adequate coverages and working capital management. The receivables increased but remain at moderate levels. The measures introduced by SBP in the wake of the COVID-19 pandemic, principal deferment and rate cut of 625bps, have provided relief to cashflows. Governance framework needs strengthening.
The ratings are dependent on the Company’s ability to maintain its leading position in the industry while sustaining top-line and margins in prevailing scenario. Meanwhile, improved financial profile through effective working capital management, maintaining strong coverages and sufficient cushion to borrow at trade level will be critical for ratings.

About the Entity
Interwood Mobel (Private) Limited was founded in 1974 by Mr. Farooq Ahmed Malik. The Company primarily deals in the manufacturing and sale of furniture and allied items. The Company operates fourteen retail outlets concentrated in Karachi (3), Lahore (2), Islamabad (3), Peshawar (1) and Gujranwala (1), with dealer networks established in other cities.
Major shareholding (99.9%) of the Company lies with Farooq Family. Mr. Farooq Ahmed Malik, the founder, and his wife Mrs. Ghazala Farooq own 17% and 16% of the Company, respectively. Each of their sons, Mr. Omar Farooq and Mr. Ali Farooq, own 33% stake in the Company. Remaining shareholding (0.1%) is held by close relatives of the family. The Company is headed by Mr. Omar Farooq, the Chief Executive Officer of the Company. He is ably supported by a professional 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.