PACRA Maintains Entity Ratings of Allah Tawaqal Metals (Pvt.) Limited

Allah Tawaqal Metals (Pvt.) Limited ("ATM" or "the Company"), established in September 2019, focusing on dismantling iron scrap and recycling metals. The Company imports metal scrap for recycling and exports of copper and aluminium alloy ingots primarily to China, the largest importer of refined copper, copper alloys, and unwrought aluminium. Additionally, ATM trades secondary and semi-finished nonferrous and ferrous metals in the local market. The recycling process can pose environmental risks if not managed appropriately. With rising environmental awareness, future regulations may become more stringent, creating potential challenges. To mitigate this risk, ATM has obtained the necessary clearance from the Provincial Environment Protection Agency (EPA), Punjab. During FY24 the Company has successfully installed a furnace, increasing its capacity from 38,000 to 43,000 metric tons to meet growing demand. Capacity utilization remained stable, with ~73% in FY24 (FY23: 72%). According to the FY24 management accounts, ATM reported a topline of PKR ~8.3bln, a slight decline from FY23’s PKR ~9.2bln, attributed to USD depreciation, which led to lower pricing. Consequently, the gross margin decreased to 9% in FY24 from 11% in FY23. The Company has a modest equity base of PKR ~1.8bln, which is significant given its scale. Its leverage structure is moderate, with no long-term borrowings. The capital expenditure for the furnace was entirely financed through internal cash generation. Working capital is managed through a combination of internal cash flows and short-term borrowings, primarily used for importing scrap, with borrowing levels tied to the volume of purchases. ATM is a family-owned and operated business, which introduces the risk of overlapping management and ownership roles. The overall governance framework is still in its early stages. The Company is led by a young and enthusiastic management team, but there is room for improvement in financial transparency. The business faces vulnerabilities to regulatory disruptions, fluctuations in international commodity prices, and potential environmental regulations, all of which could pose significant challenges to its operations.
Sustainability of revenues, adherence to environmental protection regulations, financial transparency, customer stickiness and a well-defined credit policy are critical factors for future ratings. Additionally, enhancing the management structure, governance framework, and control environment will also consider positive towards the ratings.

About the Entity
Allah Tawaqal Metals (Pvt.) Limited is a private limited company incorporated in Pakistan on September 11, 2019 under the Companies Act 2017. It is family owned and operated business with shareholding divided equally among 3 members, Mr. Muhammad Mubeen Arif, Mr. Muhammad Muneeb Arif and Mr. Muhammad Umair. Mr. Mubeen Arif Jutt is the Chairman of board as well as CEO of the Company since its incorporation in 2019.