Muhammad Atif Chaudhry
PACRA assigns Initial rating to Mughal Iron & Steel Industries Limited | PPCP | PKR 2 bln | Apr-23
|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 diversityin revenue streams. During 9MFY23, topline was reported at PKR 48,479mln (9MFY22: PKR 47,221mln; FY22: PKR 66,153mln) and has attained a bottom line of ~PKR 2,647mln in 9MFY23(9MFY22: ~PKR 4,370mln; FY22: PKR 5,411mln). The decline in profitability is attributable to PKR depreciation and increased commodity prices and finance cost. 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 23,353mln 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 underthe chairmanship of Mr. Mirza Javed Iqbal. Mr. Khurram Javaid is the execution lead as CEO and the driving force behind the Company.
Mughal Iron & Steel Industries Limited issued a Rated, Unsecured, Privately Placed Short Term Conventional Commercial Paper (CP) of PKR 2,000mln at face value to finance the company’s working capital requirements. The tenor of ICP is 9 months and carrying a profit rate of 6MK+150bps. Profit payment and principal would be made in a bullet payment at the time of maturity.