PACRA Maintains the Entity Ratings of Amreli Steels Limited

Amreli Steels Limited (Amreli or the Company) has faced significant financial and operational stress since FY23 amid a prolonged downturn in Pakistan’s steel sector, driven by weak demand, currency depreciation, high energy costs, elevated financing rates, and broader macroeconomic challenges. These pressures were compounded by internal issues, including restricted access to working capital and prolonged unavailability of LC lines, which disrupted raw material imports, forced operations at critically low capacity, and ultimately led to the shutdown of its Shershah plant. Resultantly, the Company faced unabsorbed overheads, inflated production costs, and sharp margin compression, with gross margins declining from 13.1% to 2.5% and operating margins turning negative, culminating in significant losses and a weakened liquidity position, reflected in a substantial working capital deficit of PKR 13,880mln as at June 30, 2025 and breaches of debt covenants leading to reclassification of long-term liabilities into current liabilities. This persistent deterioration was mirrored in successive credit rating downgrades from “A-” to “BBB” in May 2024, further to “B” in March 2025, and ultimately to “CCC,” indicating very high credit risk despite ongoing management efforts. To address these challenges, the Company began debt reprofiling discussions in early 2023. Delays in lender approvals, however, extended financial pressures, leading to a formal restructuring process in September 2024 and the eventual execution of a comprehensive Master Restructuring Agreement (MRA) on December 29, 2025, after satisfying all conditions precedent. The MRA aims to provide financial relief through conversion of PKR 10.17bln of short-term debt into long-term facilities, and rescheduling of PKR 2.54bln in existing long-term loans, with mark-up deferment for three years to be repaid in step up manner next 7 years inclusive of two years grace period, with markup linked to KIBOR and secured against pari passu charges on fixed and current assets. The agreement also ensured continuation of certain working capital lines and facilitated revival of LC facilities, while sponsors injected liquidity through PKR. 1bln equity at a premium, additional short-term support through the sale of non-core assets, will ease some cash flow pressures. The restructuring generated a one-time accounting gain of PKR 3.07bln from liability modifications, contributing to a net profit of PKR 1.174bln for 1HFY26. However, the operational weakness, continues including an 18.8% decline in sales to PKR 7.150 bln, gross loss of PKR 290 mln, and operating loss of PKR 474 mln, although finance costs declined due to monetary easing and restructuring benefits. While capacity utilization remains below optimal levels and core operations continue to face pressure, management has undertaken cost rationalization, suspended non-essential capital expenditure, and focused on liquidity management, resulting in an improved current ratio as of 1HFY26.
Management expects FY26 to remain subdued due to lingering demand and working capital constraints. However, the successful implementation of the MRA, with easing inflation and interest rates, and renewed lender and supplier confidence provides a foundation for gradual recovery. The MRA is also expected to stabilize the Company’s financial position and prevent further deterioration of its credit profile. Moving forward, the sustained reopening of LC lines, higher capacity utilization, and consistent cash flow generation to support timely debt servicing will be critical to strengthening the Company’s financial profile.

About the Entity
Amreli Steels Limited, established in 1984 and listed on the PSX in 2015, is primarily owned by the Akberali family, holding around 75% of the Company. The Board of Directors includes seven members, with four from the Akberali family and three independent members. Mr. Abbas Akberali, the founder, serves as Chairman, while Mr. Shayan Akberali has been the CEO since August 2017.