The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains the Entity Ratings of Al Barka Fabrics Private Limited.

Rating Type Entity
(27-Jan-23 )
(28-Jan-22 )
Action Maintain Initial
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The assigned ratings of Al Barka Fabrics reflect the adequate positioning of the company in the Processed fabrics, home-textile, and made-up industry. Al Barka Fabrics is the flagship company of Al Barka Group. The group has a long-standing association with the textile sector. The group plans diversification in other sectors, going forward. The Company has been operational as a private company principally engaged in Textile Processing (Bleaching, Dying, Printing, and Stitching) and has been operating at an optimal level. The governance framework lacks independent oversight. The Company’s management involves experienced professionals looking after the operations. The sales mix, dominated by exports, display steady improvement over the years. The Company enjoys an established customer base with several export destinations in Europe, South America, Africa, and the US. Revenues are majorly driven by exports where the company enjoys a long association with customers abroad. During FY22, the Company’s revenues increased to PKR 5.6bln (FY21: PKR 4.3bln), primarily exports. Operating profits and net profitability recorded a good-sized improvement in the recent year. The net profitability also observed improvement whilst margins witnessed a similar trend as well. The import of raw materials has become a challenge to manage which is quite essential for continued operations. The management of the receivables is essential. The Company continues to maintain a moderately leveraged capital structure and good coverages. During 5MFY23, textile exports were valued at $7.44bln compared to $7.76bln, reflecting a 4% dip YoY – the declining trend recorded in the last two months. The fall in export value has mainly come from volumetric decline as prices of almost all categories have either increased or stayed flat. This has taken a fiscal year to date exports into negative with a 1.4% decline in the first four months (July – October) FY23. Among value-added items, bedwear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, the cotton yarn has shown the largest decline of 35%. Moreover, a slowdown is expected in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at an optimal level, and sustain margins, going forward. The company is expected to adhere to conservative financial discipline, which would be crucial to ratings.

About the Entity
The Company was incorporated in 1998 as a private limited company. The core operation of the business is Textile Processing (Bleaching, Dying, Printing). The manufacturing facility is located in Faisalabad, the area known as the textile hub of Pakistan. Al Barka Fabrics Pvt. Limited is a family-owned business, with the majority stake vests with Mr. Muhammad Aslam Sheikh. His wife, Mrs. Riffat Aslam, and his sons Mr. Muhammad Saad Sheikh and Mr. Muhammad Asad Sheikh own an equal proportion of the remaining shares. There are four board members in place, all from the sponsor family.

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.