PACRA Maintains Entity Ratings of Ahmed Fine Weaving Limited

The ratings reflect modest business profile of Ahmed Fine Weaving Limited – independently owned by a family stream belonging to erstwhile Fazal family of Multan. The sponsor’s long association with the textile business is considered positive. During recent years the company’s sales mix has shifted towards local sales. Meanwhile, the company’s declined margins has limited its profitability. Moreover, re-imposition of custom duties and sales tax on cotton & yarn imports, coupled with increasing interest rates has stretched the textile industry. On standalone basis, the rupee devaluation has provided a requisite breather to the company to sustain its business margins, despite declining export sales. The management is cognizant of this and intends to strengthen its performance by expanding volumes. For the purpose the company is continuously in process of BMR activities. The expansion projects have been financed through LTFF, with comfortable debt servicing cycle. Longer tenure and competitive rates of underlying debt should help aligning the impact of these financial obligation with ensuing cash flows. The company currently enjoys good financial risk profile, reflected by (i) relatively efficient working capital cycle, (ii) healthy coverages, and (iii) moderately leveraged capital structure.

The ratings are dependent on the company’s ability to improve its margins and maintain prudent working capital and financial profile. Any negative movement in margins, impacting profitability in turn, cash flows, will negatively impact the ratings. Improvement in governance framework is important.

About the Entity
Ahmed Fine Weaving Limited (Ahmed Fine Weaving) was establish in Jul 2012. It emanated from the de-merger of Ahmed Fine Textile Mills Limited in July 2014; wherein weaving business of erstwhile was transferred to Ahmed Fine Weaving. This was done through a scheme of arrangement whereby all the assets, liabilities, agreements, arrangements and other matters relating to the weaving business were transferred to Ahmed Fine Weaving. the company currently operates with two weaving units with a total of 260 Air Jet looms.

The ownership of Ahmed Fine Weaving rests with the family of Mr. Ashar Fazal including his mother and children. The company’s board of directors comprises three members. Two members belong to the sponsoring family, while one member is executive director. Sponsoring family dominance and absence of independent oversight indicates room for improvement in the governance framework of the company. Mr. Ashar Fazal - the Chairman of board, is also the CEO of the company.