The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Upgrades Entity Ratings of Ahmed Fine Textile Mills Limited.

Rating Type Entity
(23-Feb-22 )
(25-Aug-21 )
Action Upgrade Maintain
Long Term A A-
Short Term A2 A2
Outlook Stable Positive
Rating Watch - -

The ratings reflect Ahmed Fine Textile Mills Limited's (Ahmed Fine) association with renowned business group of Pakistan. The Company is primarily engaged in the spinning business and also has presence in weaving segment through a wholly owned subsidiary – Fazal Rehman Fabrics Limited. Upgrade on the entity ratings incorporate the Company's improving business profile plus its strong financial risk matrix reflected by reasonable working capital cycle; healthy coverages; and moderately leveraged capital structure. The ratings incorporate consolidated position of the parent and that of the wholly owned subsidiary. The Company achieved commendable profitability in FY21. The momentum was maintained in the subsequent quarter. During 1QFY22, the Company's revenue witnessed 28% YoY growth to stand at PKR 1.6bln. During the period, robust margins has strengthened the net-income to stand at PKR 302mln. Healthy coverage and reduced debt payback are displaying comfortable picture. The management is positive about sustaining the growth momentum, going forward. Furthermore, Ahmed Fine is planning on enhancing its capacity by 49,248 spindles, thereby improving its business profile to boost revenues. During the period July-December FY21-22, textile exports surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. Going forward, the textile sector’s outlook is expected to stay positive in the medium term where the demand for textile products is expected to sustain. In the local market, the textile sector has recorded strong performance. The relief measures introduced by the State Bank of Pakistan such as deferment of loan payments for one year, low-interest rates, and salary refinance scheme also provided comfort to the sector. Many players have also availed the TERF scheme announced by the Central Bank. This will lead to overall leverage of the sector to increase; however, on relaxed financing rates. The sustainability of demand pattern for the current higher orders from Europe and USA remains essential for the feasible utilization of added capacity by textile players.
The ratings are dependent on continuous strengthening of business operations under the current economic conditions; and sound financial profile with good coverages and moderate leveraging. The Company’s ability to generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

About the Entity
Ahmed Fine Textile Mills Limited (Ahmed Fine), incorporated in 1989, is engaged in manufacturing and marketing of different varieties of yarn. The company operates one spinning unit having 46,128 spindles, manufacturing coarser-count yarn. Power requirement stands at 6MW; met through captive sources. The board of directors contain seven members in total. Mr. Rehman Naseem, the CEO, carries with him over two decades of experience in textile sector. He is supported by a team of seasoned professionals, supplementing his capabilities.

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.