The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Upgrades Entity Ratings of Basfa Textile (Pvt.) Limited

Rating Type Entity
(02-Mar-22 )
(29-Mar-21 )
Action Upgrade Maintain
Long Term BBB BBB-
Short Term A2 A3
Outlook Stable Stable
Rating Watch - Yes

Basfa Textile (Pvt.) limited is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn. Basfa group also has presence in chemical sector under the name of Basfa Industries (Pvt.) Limited and AutoCoatings (Pvt.) Limited. Company has over the years successfully established its niche market in viscose yarn. Being importer of viscose, the Company remains exposed to exchange rate risk. However, the Company was able to pass on impact of exchange rate to its customers to an extent. Furthermore, the Company is also involved in the process of regenerated yarn at small scale through Auto Couru Titan. This recently added unit produced courser count yarn through the waste of yarn. Governance framework lacks independent oversight. The assigned ratings incorporate the Company’s good operating track record with an adequate business profile. Over the years the Company’s revenue base reflected growth to stand at PKR 3bln in FY21 (FY20: PKR 2.5bln). Margins displayed improvement and profitability recorded growth of 91 % (FY21: PKR 105mln, FY20: PKR 55mln). The Company has an adequate financial profile characterized by moderate leveraging and adequate coverages. Regular BMR and establishment of second plant has increased the need of working capital financing. Despite of this, the Company has still a positive room to borrow at net trade assets level depicting adequate ability to borrow, if need arises. The management has expressed intention redeploy the bulk of profitability generated through the business for future expansion of second plant. 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.
The ratings depend on sustaining operations, profitability and ensuing cash flows. Governance framework and independent oversight needs improvement. At the same time, prudent management of short-term liquidity is considered important. Sustaining business margins while maintaining strong financial profile remains critical.

About the Entity
Basfa Textile (Pvt.) Ltd, incorporated and operational since 2006, is engaged in the manufacturing and sale of Cotton and Viscos Yarn. 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 20-KM and 36-KM Ferozepur Road, Lahore respectively. Second plant is located at Feroz Watwan Road, Chandi Kot Stop, Sheikhupura. Basfa Textile’s total power requirement is ~5.90MW 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. Babar Jahangir has been with the Company since 2008, having overall experience of more than once decade. His innovative technological skills in the field of textile sector brings specialized and comprehensive knowledge to 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.