The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Roomi Fabrics Limited

Rating Type Entity
(25-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

The ratings reflect adequate business profile of Roomi Fabrics Limited (Roomi Fabrics’ or ‘The Company’). A change in shareholding of Roomi Fabrics is expected. Thereby, the shareholding of Mahmood Textile Mills shall dilute whereas shareholding of Masood Fabrics shall enhance. Topline of the Company inclined sizably and exports constituted 69% of the revenue. Margins of the Company witnessed substantial surge. Consequently, the Company reported bottom-line of PKR 1,105mln in 1HFY22 (1HFY21: 191mln). The financial matrix reveals high leveraged capital structure. However, coverages witnessed improvement on account of enhanced free cashflows. Working capital cycle reduced considerably driven by lower inventory days. The Company has built a significant investment portfolio that is managed at the group level which further enhanced during the period. Overall profitability of the Company remains a function of income from its sizable investment portfolio in shape of dividends and capital gains/losses. Although the Company is invested in blue-chip scrips, high market risk exposes the Company to volatile returns, this concern is magnified as the investments are partially financed through short-term borrowings. During 9MFY22 (Jul21-Mar22), Pakistan textile exports surged to $14.2bln (recording growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth. However, month on month basis, textile exports have declined by 3.5%. Going forward, the textile sector’s outlook is expected to stay good in the medium term where demand for textile products is expected to sustain.
The ratings are dependent on the Company’s ability to sustain its operations. Meanwhile prudent working capital management and generating sustainable cashflows from core operations are important. Removal of ‘Watch’ represents decent financial performance and major portion insurance claim received for the fire incident.

About the Entity
Roomi Fabrics Limited is a venture of Mahmood Group, which was originally established in 1935, by entering the tannery business. Roomi Fabrics is engaged in manufacture and sale of yarn, greige fabric, terry towel and bed linen with 36,000 spindles and 228 looms. Overall control vest with three board members, all of whom are from the sponsoring family. Mr. Jalaluddin Roomi is the CEO of the Company, who has more than 30 years of experience in the textile industry. He has vast experience in leading different government, semi-government and public limited companies.

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.