The Pakistan Credit Rating Agency Limited
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Muhammad Hassan

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PACRA Maintains Entity Ratings of Allawasaya Textile & Finishing Mills Limited

Rating Type Entity
(30-Oct-19 )
(30-Apr-19 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect Allawasaya Textile and Finishing Mills Limited’s (the Company) association with three industrial families of Multan and demonstrated support of sponsors. Sponsors have presence in the oilseed extraction industry and other segments of textile value-chain. The Company is involved in the manufacturing and sale of cotton yarn and man-made fibers. The Company enhanced its capacity during the year, though it still remains relatively small. Recent devaluation of Pakistani currency had no tangible impact on the Company’s revenue, since all its sales are made in the local market. The margins of the Company were squeezed during first 3QFY19, which led to losses as business performance remained under pressure. However, with the completion of the Company’s BMR in the last quarter of FY19, the Company’s performance started to improve. The financial profile of the Company is characterized by moderate leveraging and low coverages. The Company took additional debt to finance BMR. Material improvement in cash flows, in line with upcoming debt obligations, remain imperative.
The ratings are dependent upon the sponsor support and management's ability to improve margins, profitability and the Company’s competitive position in the industry. This includes keeping the debt levels manageable. Any further deterioration in margins or coverages will have a negative impact on the ratings.

About the Entity
Allawasaya Textile and Finishing Mills Limited (the Company), is a listed company engaged in the manufacturing and sale of different varieties of yarn. The Company currently operates 38,712 spindles, after the recent completion of its BMR. The Company fulfills its energy needs in-house and has a production capacity of 4.2MW, as well as a backup connection from MEPCO. The Company is primarily owned by Tauqir Family (37.6%), Jamil Family (35.4%) and Maqbool Family (25%), while rest is owned by the friends of the families.

Overall control vests in an eleven-member board of directors, which includes five non-executive directors, three executive directors and three independent directors. Three members represent Tauqir family, two members including the Chairman, Mr. Mian Muhammad Jamil, represent Jamil Family while two members including the CEO, Mr. Mian Tanvir Ahmed, represent Maqbool Family. The CEO carries the extensive experience of the textile industry and is supported by an experienced management team.

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.