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The Pakistan Credit Rating Agency Limited
Press Release

Date
27-Dec-19

Analyst
Muhammad Hassan
muhammad.hassan@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Roomi Fabrics 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 adequate business profile of Roomi Fabrics Limited (Roomi Fabrics’ or ‘The Company’) and its association with Mahmood Group. The Company is principally engaged in the manufacturing of yarn and griege fabric, primarily catering to the fashion market. The Company has built a significant investment portfolio that is managed at the group level. The Company witnessed growth in its topline and margins which led to improved profitability from core operations. Overall profitability of the Company remains a function of income from its large investment portfolio in shape of dividends and capital gains/losses. Although the Company is invested in blue-chip scrips, high market risk exposes the Company to volatile returns. This concern is magnified as the investments are partially financed through short-term borrowings. The recent upsurge in equity market favors the Company’s investment portfolio as valuations increase. Free Cashflows have recently shown improvement resulting in better coverages. However, financial profile of the Company remains stretched given highly leveraged capital structure and limited borrowing capacity. Board’s vast experience and association with Mahmood Group bodes well for the Company.
The ratings are dependent on the Company’s ability to improve its financial profile by reducing leveraging. The management is working on this front and timely materialization of these initiatives is critical. Additionally, maintaining margins and improving profitability from core operations is important. Significant deterioration in coverages and/or margins will impact the ratings.

About the Entity
Roomi Fabrics is a venture of Mahmood Group, which was originally established in 1935, by entering the tannery business. Now the group has presence in complete cotton chain (growing to finished products), tanneries, real estate, and food. Cumulatively the group operates ~300,000 spindles and ~850 looms, out of which 36,000 spindles and 228 looms come under Roomi fabrics. The group has lately entered into the hospitality sector, putting up hotels along 'Avari Express' in Multan. Mahmood Group Sponsors cumulatively own 64% directly via individuals and the remaining shareholding is owned through group companies.

Overall control vest with eight board members, all of whom are from the sponsoring family. Mr. Jalaluddin Roomi is the CEO of the Company, who has more than 30 years of experience in the textile industry. He has vast experience in leading different government, semi-government and public limited companies. Currently he also serves on the board of Arif Habib Corporation and Shakarganj Limited.

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.