The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA updates Entity Ratings of Allawasaya Textile & Finishing Mills Limited

Rating Type Entity
(26-Apr-21 )
(30-Apr-20 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch Yes Yes

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 PC Yarn, PV Yarn which is man-made fiber & CVC Yarn. The Company’s displayed improvement in the revenues in 1HFY21 is due to attributable to recent BMR. Margins witnessed uptick as at end-Dec20 (gross: 8.2%; operating: 5.5%) on the back of improved prices. Hence, the Company recorded a net profit of PKR 15mln in FY20 (FY19: PKR -16mln); the positive trend should continue. The financial risk matrix performed well, comprising low leveraged capital structure along with maintained coverage. Going forward, the Company is planning to acquire debt to finance CAPEX. Material improvement in cash flows in line with upcoming debt obligations remains imperative.

The outlook of the Company is 'stable' as the company resumed operations and continued its business fundamentals after resumption of operations post July 20. The Rating Watch signifies the prevailing uncertainty due to the ongoing challenges of COVID-19 pandemic. While the business continues to function, there is need to remain vigilant. Textile industry dynamics are prove to challenges posed by third wave of COVID-19 pandemic. Exports front witnessed dilution in last two months of CY21.Trend of exports orders will determine stability in sector’s outlook in the medium term.
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.