PACRA Maintains Entity Ratings of Amreli Steels Limited

The ratings reflect Amreli Steels' good business profile on account of the company’s market positioning in the industry. The Company produces two key products: i) steel billets, ii) rebars including a) Grade 60 Deformed Steel bars and b) Xtreme bars (G-500W). The Company has achieved capacity expansion of melting and rebar manufacturing capacity to 400,000 tpa and 605,000 tpa respectively. This will be enhanced to 600,000 and 1,105,000 for melting and rebar respectively. However, focused efforts to vigilantly channel volumes from enhanced capacity amid slow infrastructural activity remains essential for the Company. The general industry dynamics reflect weakening. Meanwhile, regulatory protection to the finished product (rebar) is an advantage for the sector. The volumetric increase (from recently added capacity) improved topline but margins declined - an industry wide phenomenon - attributable to increased raw material prices, depreciating Pak rupee and significant rise in distribution costs incurred by the company. The financial risk profile deteriorated owing to decline in coverages attributable to sizable increase in finance costs. Going forward, upholding business profile remain vital for the ratings. The ratings draw comfort from strong business acumen of Amreli Steels' sponsors - Akberali Family.

The ratings are dependent on the management's ability to uphold its business vis-à-vis financial risk profile. Utilization of enhanced capacity and improved margins are vital. Moreover, prudent management of financial affairs remains important.

About the Entity
Amreli Steels Limited, incorporated in 1984, obtained listing on Pakistan Stock Exchange on Dec 1st, 2015. The company is majority owned by Akberali family (~75%), followed by financial institutions (~18%) and general public (~7%). Sponsoring family carries over six decades of experience in steel and allied business. Amreli Steels operates a re-rolling mill (capacity: 605,000tpa) and a billet manufacturing plant (capacity: 400,000tpa).

Amreli Steels has a seven-member board of directors; four are from the sponsoring family while three are independent members. Mr. Abbas Akberali - the founding member - holds the position of Chairman, whereas his son, Mr. Shayan Akberali is the CEO of the company. The management team carries extensive relevant experience and has a long association with the company.