Muhammad Atif Chaudhry
PACRA Assigns Preliminary Ratings to Mughal Iron & Steel Industries Limited | PPCP | PKR 2 bln | TBI
|Rating Type||Debt Instrument|
Mughal is a known name in the steel industry. The Company’s business profile has sustained and improved, over the last few years. The governance framework is strengthened by the presence of independent oversight on the board. The Company has a diversified product slate as its operating both in ferrous & non-ferrous segments. The ferrous segment comprises Billets, Rebars & Girders while the non-ferrous segment comprises Copper ingots mainly. Furthermore, the establishment of strong brands like ‘Mughal Supreme’ gives a competitive edge to the Company. The ratings incorporate the essence of material advancement that Mughal achieved in terms of further diversity in revenue streams.
The reported profitability for June 22 showed significant growth from previous years primarily due to an increase in sales prices as volumes in the ferrous segment declined slightly. Margins witnessed a slight decline as the impact of an increase in raw material prices and other input costs were not completely transferred into sale prices. The overall debt of the company has been witnessing an increasing trend on account of ongoing expansions and supplementary cushion for the shortcomings of working capital, due to which short-term borrowing contributed a significant portion to the total debt. While the Company is also planning to finance its short-term working capital needs through the issuance of unsecured commercial papers. However, comfort can be drawn from a strong equity base of PKR 20.8 billion driven by healthy profits.
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remains important. Moreover, upholding of governance framework is vital.
Mughal Iron & Steel Industries Limited (Mughal), is a public limited company incorporated in 2010 and is primarily engaged in the manufacturing and sale of billets, girders, and rebars. The Company has expanded its product base, by entering the non-ferrous segment. Mughal operates with a melting capacity of 500,000 M.T, rerolling capacity of 630,000M.T and non-ferrous melting capacity of 10,000M.T. Currently, a nine-member BoD is monitoring the overall functioning under the chairmanship of Mr. Mirza Javed Iqbal. Mr. Khurram Javaid is the execution lead as CEO and the driving force behind the Company. Other senior-tier management is associated with the company for a fairly long period. Diversified skill set and experience of multiple years reflected in member's profile, contribute to the strong foot printing of the Company in the market.
Mughal Iron & Steel Industries Limited is in the process of issuing Rated, Unsecured, Privately Placed Short Term Conventional Commercial Paper (CP) up to PKR 2,000mln (inclusive of a Green Shoe option of PKR 500mln) at face value to finance the company’s working capital requirements. The tenor of ICP will be up to 9 months and will be carrying a profit rate of 6MK+150bps. Profit payment and principal would be made in a bullet payment at the time of maturity. The instrument would be unsecured.