The Pakistan Credit Rating Agency Limited
27-Dec-19
Analyst
Muhammad Hassan
muhammad.hassan@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
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PACRA Maintains Entity Ratings of Mahmood Textile Mills Limited
| Rating Type | Entity | |
|
Current (27-Dec-19 ) |
Previous (28-Jun-19 ) |
|
| Action | Maintain | Maintain |
| Long Term | A- | A- |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect growing business profile of Mahmood Textile Mills limited (‘Mahmood Textile’ or ‘The Company’) – the flagship entity of Mahmood Group. Business operations comprise a spinning segment and two weaving units. Continuous BMR activities have led the Company to witness decent growth in topline in recent years, furthered in the current year due to addition of new spindles and up gradation of existing machinery. Recent devaluation of rupee and enhanced capacity contributed to improved margins, despite higher finance cost. The Company has a sizable investment portfolio which is managed at Group level. Although, the Company has invested in blue-chip stocks, high market risk exposes the Company to volatile returns, mitigated to some extent through diversification in investment mix. The recent upsurge in equity market favors the Company’s investment portfolio as valuations increase. Financial risk of the Company remains stretched given low borrowing capacity at trade level and adequate core debt service coverages. However, improvement in free cashflows provided some relief. The board’s vast experience and association with Mahmood Group remained important rating factors.
The ratings are dependent on sustaining margins, prudent management of investment portfolio and related borrowings. Improvement in core coverages is critical. Significant losses in investment portfolio, leading to lower profitability, and/or deterioration in coverages may impact the ratings negatively.
About
the Entity
Mahmood Textile Mills Limited, incorporated in 1970, is a family-owned business primarily engaged in the production and sale of yarn and greige fabric. The Company operates with 115,824 spindles and 196 looms. It is listed on The Pakistan Stock Exchange. Mahmood Group – sponsor – cumulatively holds over 90% stake via individuals and Group companies. The Group has interests in textile, ginning, leather, food, real estate, and power sectors.
Overall control of the Company vests with a seven-member BoD. Six board members belong to the sponsor family and one is an independent director. Management control also vests with Mahmood Group. Mr. Khawaja M. Iqbal – CEO – has more than four decades of textile experience. He is supported by a seasoned management team.