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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Apr-19

Analyst
Ateeb Riaz
ateeb.riaz@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 Basfa Textile (Pvt.) Limited

Rating Type Entity
Current
(30-Apr-19 )
Previous
(28-Dec-18 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect adequate business profile of Basfa Textile (Pvt) Ltd. The Company is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn. Sponsor’s primary business interest is in car paint and chemical raisins. However, lately they diversified into textile sector i.e. through Basfa Textile. Recent devaluation of Pakistan currency is expected to bode well with textile industry. However, on standalone basis, the Company being an importer of raw material suffered from devalued currency, which in turn decreased margins. The Company has over the years successfully created its niche market in viscose yarn, which is expected to provide stability to its margins in future. Building on these benefits, the management has fully shifted to viscose yarn in FY19. The Company has minimal long-term debt which keeps the financial risk profile at low level. Short-term borrowings are used to finance its working capital needs.
The ratings are dependent on sustaining business margins while maintaining financial risk at low level. Governance framework and financial transparency needs improvement. At the same time, prudent management of short-term liquidity is considered important.

About the Entity
Basfa Textile (Pvt.) Ltd, incorporated and operational since 2006, is engaged in the manufacturing and sale of Viscos Yarn (Capacity: 34,632 spindles). Viscose yarn is sold under the brand name of “Super-Diamond” and Cotton yarn – under the brand name of “Super-Gold”. The corporate office of the Company and plant is located at 36-KM Ferozepur Road, Lahore Basfa Textile’s total power requirement is ~3MW which is being provided by LESCO – with two dedicated line.

The CEO/Chairman, along with other family members collectively own (100%) shares of the Company. Board comprises two members including CEO/Chairman and Managing Director. The CEO/Chairman of the Company – Mr. Jahangir Saleem is the founder of the group, having overall experience of ~40 years. Mr. Babar Jahangir, the son of the chairman serves - as Managing director of the Company. He is responsible for operations of the Company and associated with the business for close to a decade, also serves the position on the board.

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.