The Pakistan Credit Rating Agency Limited
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Ateeb Riaz

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PACRA Maintains Entity Ratings of Maksons Textile (Private) Limited

Rating Type Entity
(18-Sep-19 )
(19-Mar-19 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect modest business profile of Maksons Textile (Private) Limited (the Company), depicted by its niche market operations and adequate margins. Lately, margins have come under pressure as cost of imported raw material increased without commensurate rise in the Company's products in export market. This also led to contraction in top line and put pressure on the Company's profitability in FY19. The ratings incorporate the Company's experienced management team along with effective control environment. The country's textile industry remained stagnated during FY19, despite ~34% currency devaluation and incentives introduced by the government to promote exports. With planned BMR activities in the short-term, the Company is expected to bring efficiencies and growth, going forward. The Company has a relatively stretched financial risk profile, characterized by moderate leveraging and depressed coverages. Although the leveraging decreased during FY19 on account of lower short-term borrowings, coverages came under pressure due to depressed cash flows. The ratings account for financial strength of the Company's sponsors - AL-Tariq Group - having strong presence in engineering and trading segments.
The ratings are dependent on improving margins, in turn, profitability and ensuing cash flows. Rationalization of top ten client concentration remains critical. Meanwhile, maintaining moderately leveraged capital structure and adequate coverages is important. Any significant deterioration in profits and/or coverages will have a negative impact on ratings.

About the Entity
Maksons Textile (Private) Limited (Maksons) was incorporated in 2000. It is a modern weaving unit specializing in greige fabrics, processed fabrics and made-ups including home textile. Maksons has a state of the art weaving unit with an installed capacity of 114 weaving looms including Airjet & Sulzer looms. Shareholding is held equally by four individuals. The Company belongs to Al-Tariq Group, specializing in engineering, having companies involved in construction, trading, textile and power generation.

Maksons Textile’s Board comprises four members, all are sponsors. The position of the Chairman is held by Mr. Abdul Quddoos whereas Mr. Khalid Majeed is the CEO of the Company. The day to day operations are run by Director - Mr. Muhammad Khalid - whereas the CEO assumes more of monitoring role and also looks after the financial and banking issues.

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.