The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Upgrades Entity Ratings of Allawasaya Spinning Mills (Pvt) Limited

Rating Type Entity
(03-Mar-22 )
(26-Apr-21 )
Action Upgrade Maintain
Long Term BBB- BB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch - Yes

Pakistan is the fourth-largest producer of cotton in the world. Punjab is of special importance in this regard as about 80% of the total production is produced in Punjab. This year, the cotton crop is being cultivated on about 4 million acres, which is expected to yield an average of more than 17 million per acre. The Punjab government is providing Rs. 1,000 per bag of approved varieties of seeds and whitefly protection to cotton growers for an area of more than 200,000 acres at a subsidy of Rs. 4.4 billion. The approved BT varieties of cotton are IUB 13, MNH 886, BS 15, Niab 878, and FH 142 while other approved varieties for specific districts should be selected in consultation with local agronomists.
Allawasaya Spinning Mills (Pvt.) Limited is a spinning mill manufacturing and sale of yarn. The Company manufactures various types of cotton rings and open-end yarn. The company generates almost 100% sales through local customers (70% are from Karachi and 30% are from Faisalabad). The upgrade in ratings reflects the improved business performance of the Company. Assigned ratings take into account the growth in revenues and higher margins. The profitability of the Company has grown over the years supported by strong margins led by operating efficiencies. The company’s financial risk profile displays the improvement in cash flows, interest, and debt coverages along with a consistent low leveraged capital structure. Going forward, the planned CAPEX is expected to bring in efficiency gains and improve margins. The Company’s association with an established business family in the spinning sector of the textile industry provides comfort to the ratings.
The ratings are dependent upon the management’s ability to improve margins, profitability and financial profile of the Company. This includes keeping the debt levels manageable and improving the Company’s competitive position in the industry. The sponsor’s support and business acumen remain important for the ratings.

About the Entity
Allawasaya Spinning Mills Limited started operations in 2004 as a Spinning Mill with an installed capacity of 25,800 spindles. Going forward, Company’s head office and production facility are located in Multan. The Company is owned by Jamil Family, which also has a major share in Allawasaya Textile and Finishing Mills Limited. Mr. Mian Muhammad Jamil owns, (7%) shareholding in the Company directly and (36%) indirectly through his daughters. Mr. Mian Alamgir Jamil, son of Mr. Mian Jamil owns, (43%) shareholding in the Company directly and (14%) indirectly through his spouse.
The Company has a two-member board, which is entirely comprised of the sponsor family members. Mr. Mian Muhammad Jamil is the Chairman of the board and Mr. Mian Alamgir is the other Executive Director and the CEO of the Company. Both the Chairman and the CEO have vast industry experience and hold directorships in other textile businesses.

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.