The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Roomi Fabrics Limited.

Rating Type Entity
(23-Jun-23 )
(25-Jun-22 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect the business profile of Roomi Fabrics Limited (Roomi Fabrics’ or ‘The Company’). The change in shareholding of Roomi Fabrics is completed. Thereby, the shareholding of Mahmood Textile Mills is diluted whereas the shareholding of Masood Fabrics is enhanced. The top line of the Company inclined sizably over the last three years and exports constituted 88% of the revenue. The margins were largely maintained in 9MFY23. Consequently, the Company reported a bottom line of PKR 452mln in 1HFY23 (1HFY22: 1,105mln). The financial matrix reveals a highly leveraged capital structure. However, coverages inched down on account of declining free cashflows. The working capital cycle increased considerably driven by high inventory days. The Company has built a significant investment portfolio that is managed at the group level which was further enhanced during the period. The overall profitability is supplemented by income from its sizable investment portfolio in the shape of dividends and capital gains/losses. Although the Company is invested in blue-chip scrips, high market risk exposes the Company to volatile returns, this concern is magnified as the investments are partially financed through short-term borrowings.
Textile exports in 9MFY23 were valued at $10.08bln, an 8% YoY decline. Lower demand, high cotton prices, and weak yarn demand contributed to the export decrease. Bedwear saw the largest decline of 19%, while knitwear dropped by 10%. Cotton yarn experienced a significant decline of 35%. Demand is expected to improve post-Jun-23 despite inflationary pressures
The ratings are dependent on the Company’s ability to sustain its operations. Meanwhile, prudent working capital management and generating sustainable cash flows from core operations are important. Removal of ‘Watch’ represents decent financial performance and a major portion insurance claim received for the fire incident.

About the Entity
Roomi Fabrics Limited is a venture of Mahmood Group, which was originally established in 1935, by entering the tannery business. Roomi Fabrics is engaged in the manufacture and sale of yarn, greige fabric, terry towels, and bed linen with 36,000 spindles and 228 looms. Overall control vest with three board members, all of whom are from the sponsoring family. Mr. Jalaluddin Roomi is the CEO of the Company, who has more than 30 years of experience in the textile industry. He has vast experience in leading different government, semi-government, and public limited companies.

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.