The Pakistan Credit Rating Agency Limited
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Ateeb Riaz

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PACRA Maintains Entity Ratings of AL Textile (Private) Limited

Rating Type Entity
(03-Sep-19 )
(05-Mar-19 )
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The assigned ratings of AL Textile (Pvt.) Limited (AL Textile) reflect strong financial profile of Sponsors and their support to the entity in the form of guarantee and subordinated loan. The Company mainly caters to the need of local market and has developed brand based clientele over the years. The Company's revenue has witnessed growth in harmonization with textile industry in the past. However, the top line remain stagnant during FY19. The relatively smaller capacity of AL Textile has limited its margins. Recently, the Company's margins and profitability have come under pressure on the back of higher input and finance costs, leading to net loss in FY19. The imposition of sales tax on local sales is expected to have a negative effect on local demand. However, favorable government policies towards textile industry, subsidized utilities, and rupee depreciation is expected to bode will for export-oriented textile players. While incorporating these factors, the Company expects its business profile to improve in near future. The Company has a moderately leveraged capital structure characterized by adequate coverages and moderate inventory days. The management intends to implement further financial discipline by limiting leveraging. The ratings take comfort from explicit commitment of sponsors to provide support to the Company.
The ratings are dependent on the Company’s ability to improve its margins and financial profile. Any further reduction in margins, impacting cash-flows and profitability for a long period will impact the ratings. Similarly, prudent working capital management is considered important. Going forward, sponsors support to the Company would remain critical for the ratings.

About the Entity
AL Textile commenced its operations in 2003 as a private limited company. The Company has one spinning unit with 25,200 spindles. Their production facility is located on Main Multan road (43 km), Lahore. AL Textile is a family owned business, with majority stake owned by Mr. Omer Latif (~61%) and the remaining shareholding is distributed equally (~19% each) among his brother and sister.

The Company’s board of directors comprises two members, with Mr. Omer Latif as Chairman of the board. He is also the CEO of the Company, and is supported by a team of seasoned professionals.

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.