The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of M.Y. Bari Mills (Pvt.) Limited

Rating Type Entity
(20-Jul-23 )
(20-Jul-22 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Positive Positive
Rating Watch - -

Bari Mills is a family-owned private company operated by a seasoned business family in Karachi. The Company is primarily an export-oriented, towel manufacturing concern. The Company owns a modern and integrated production facility to produce quality products- towels, towel garments, and most recently Jersey Bed Linen. FY23 was a challenging year, during the first half catastrophic flood impacted a substantial portion of the country. This was followed by economic recession and various macroeconomic imbalances, such as high inflation and interest rates, massive rupee depreciation, and depleting foreign exchange reserves. Overall exports of the towel industry decreased during 9MFY23 and stood at USD ~745mln as compared to USD ~820mln same period last year depicting a negative growth of ~9% value-wise, where volumes also posted a negative growth of ~13% in the same period. The towel sector’s contribution to overall textile exports was unchanged and stood at ~6%. Pakistan has earned a reputable position among towel-exporting countries due to its exceptional product quality and the significant benefits it provides to the local industry. During 9MFY23 revenue of the Company decreased by ~14% and stood at PKR 3,940mln gross margins sustained at ~13% however, net margin posted some dilution. As of June 23, ~63% of exports diverted to the USA (FY22 ~66%) while remaining towards Europe. The revenues are expected to follow an upward trajectory as depicted in financial projections hence capturing a positive outlook. On a standalone basis, the Company’s concentration levels – both customer and geographical – are high with the majority of company revenues (~42%) emanating from a single customer. The Financial risk profile of the Company is characterized by comfortable cashflows, coverages, and working capital cycle. Capital structure is leveraged with a mix of long-term and short-term borrowings. After the ease of the pandemic, manufacturing capacities from regional competitors are coming online, which can create challenges for the future sustainability of higher demand, on the flip side higher policy rate of 22% will assert further pressure on the cost of doing business. However, the Company has availed concessionary borrowing from SBP (LTFF & ERF) which adds comfort to the assigned ratings. In the absence of any further debt-driven expansion in the medium term, the financial profile is expected to improve.
The ratings are dependent on maintaining optimal operations with sustained growth in revenue and margins, reducing customer concentration while maintaining financial risk at a low level is critical. Meanwhile, strengthening the governance framework and control environment for better oversight of strategic affairs is essential for ratings.

About the Entity
M.Y. Bari Mills (Pvt.) Limited (Bari Mills) was incorporated in 2012 as a private limited company. Primary business of the Company is to manufacture and export towels with a total installed capacity of 178 looms. Mr. Haroon Bari owns 20% of shares and the remaining shareholding is evenly distributed among his five sons (16% each). The BoD comprises five members with Mr. Haroon Bari as Chairman. He brings ~49 years of experience in textile industry with him. The CEO of the Company is Mr. Nabeel Haroon Bari, a graduate from UK in the field of commerce with overall working experience of ~21 years with the group. There is no independent director on 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.