The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Atif Chaudhry

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PACRA assigns Preliminary rating to Mughal Iron & Steel Industries Limited | PP Sukuk | PKR 2.5bln | TBI

Rating Type Debt Instrument
(21-Aug-23 )
Action Preliminary
Long Term AA-
Short Term -
Outlook Stable
Rating Watch -

Mughal is a known name in the steel industry. The Company’s business profile has sustained and improved, over the last few years. The Company has a diversified product slate as it operates both in ferrous & non-ferrous segments. The ferrous segment comprises Billets, Rebars & Girders while the non-ferrous segment comprises Copper ingots mainly. Furthermore, the establishment of strong brands like ‘Mughal Supreme’ gives a competitive edge to the Company. During 9MFY23, topline was reported at PKR 48,479mln (9MFY22: PKR 47,221mln; FY22: PKR 66,153mln) and has attained a bottom line of ~PKR 2,647mln in 9MFY23 (9MFY22: ~PKR 4,370mln; FY22: PKR 5,411mln). The decline in profitability is attributable to PKR depreciation and increased commodity prices and finance cost. The overall debt of the Company has been witnessing an increasing trend on account of ongoing expansions and supplementary cushions for the shortcomings of working capital.
The Company is planning to finance its short-term working capital needs through the issuance of Sukuk. However, comfort for the rating is drawn from the security structure of Sukuk which is strengthened by i) Pari-passu hypothecation charge over-all present & future Current Assets of the Company with a margin of 25%. Sukuk will be upgraded to a pari-passu charge from a ranking charge within 120 days from the final disbursement date and ii) A debt payment account (DPA) will be maintained with an agent bank under exclusive charge & right of set-off in favor of Sukuk holders. The funds equivalent to one-third (1/3rd) amount of upcoming markup/ profit payment not later than the 10th date of each month (“Monthly Payment”) would be placed into the DPA so that the aggregate amount available in the DPA on the upcoming Payment Date is equal to the relevant payment Amount. While principal, upfront, an amount equivalent to 10% of the Issue size will be maintained in the DPA account throughout the tenure of the instrument. And for the last quarter, in addition to the 10% of the issue size already kept in the DPA account, the issuer will deposit in DPA 1/3 of the principal payable on the 10th of each month such that the entire principal would be accumulated before the due date, along with 1/3rd of the markup/profit payable.

About the Entity
Mughal Iron & Steel Industries Limited (Mughal), is a public limited company incorporated in 2010 and is primarily engaged in the manufacturing and sale of billets, girders, and rebars. The Company has expanded its product base, by entering the non-ferrous segment. Currently, a nine-member BoD is monitoring the overall functioning under the chairmanship of Mr. Mirza Javed Iqbal. Mr. Khurram Javaid is the execution lead as CEO and the driving force behind the Company.

About the Instrument
Mughal is in the process of issuing Rated, Privately Placed, Secured Islamic Certificate (“Sukuk” or the “Issue”) of PKR 2,500 million (inclusive of a Green Shoe Option of PKR 1,000 million) in Aug-23 to finance the company’s working capital requirements. The tenor of Sukuk will be up to 15 months and will be carrying a profit rate of 3MK+145bps with profit payable quarterly in arrears on the outstanding principal amount. The principal would be made in a bullet payment at the time of maturity.

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