PACRA Revises the Entity Ratings of Amreli Steels Limited

Amreli Steels Limited (“Amreli” or “the Company”) operates within the high-risk steel sector, which has been under severe pressure since FY23. The industry continues to face challenges such as weak demand, sharp PKR depreciation, elevated financial costs, record-high energy tariffs, and a substantial surge in input prices. These factors have placed considerable strain on the industry, with many steel mills operating at a fraction of their capacity and some on the brink of closure. In addition to sector-specific challenges, Amreli has been grappling with operational difficulties, including persistently high energy and financing costs, as well as restricted access to working capital facilities. These factors have significantly impacted the Company's sales volumes. Consequently, Amreli’s credit rating was adjusted by two notches from “A-” to “BBB” in May 2024. Despite management’s efforts to implement a comprehensive strategic plan, progress has been limited. Capacity utilization dropped sharply, further deteriorating the Company’s financial position and prompting another revision in the credit rating to “B” in March 2025. Although the Company was already facing a very high credit risk, the rating was placed at “B” in recognition of the management’s efforts and commitment to implementing corrective measures. However, these efforts have yet to materialize, and while the Company continues to pursue debt restructuring, a final agreement has not yet been reached. Capacity levels have remained critically low, insufficient to absorb fixed costs, which has led to unabsorbed overheads, inflated production expenses, and a sharp decline in gross margins—from approximately 13.1% in FY23 to 6.2% in FY24, and further down to 2.6% in 9MFY25. Operating margins turned negative for the first time, adding further pressure to the already weakened financial profile. The financial strain intensified due to elevated finance costs, primarily stemming from the Company’s reliance on short-term borrowings to meet working capital requirements, as well as long-term financing secured during post-FY21 to support efficiency project and expansion triggered by a temporary surge in demand. These factors collectively resulted in a net loss of approximately PKR 2.9 billion for the nine-month period ended FY25. Given the ongoing financial and operational challenges, the Company’s credit rating was subsequently revised to “CCC,” reflecting a very high level of credit risk.
The revised ratings reflect Amreli’s weakened financial position, driven by low-capacity utilization and mounting debt repayment pressures. In response, management is implementing a strategic turnaround plan centered on an ongoing debt restructuring, which includes a grace period on interest and principal payments to ease cash flow and support reinvestment. Liquidity is expected to improve through revived working capital lines, divestment of non-core assets—some already completed—and a PKR 1bln equity injection by the sponsor. Management is confident that the restructuring will be successfully concluded and that critical financial support from lending partners will be restored. This will enable the Company to access credit lines and open LCs for essential imports, helping stabilize operations. Management anticipates that these measures will lead to operational improvements and a gradual recovery in capacity utilization by the end of FY25. Timely materialization of these efforts and the realization of expected positive outcomes will be viewed favorably and may support future improvements in the credit rating.

About the Entity
Amreli Steels Limited, established in 1984 and listed on the PSX in 2015, is primarily owned by the Akberali family, holding around 75% of the Company. The Board of Directors includes seven members, with four from the Akberali family and three independent members. Mr. Abbas Akberali, the founder, serves as Chairman, while Mr. Shayan Akberali has been the CEO since August 2017.