Muhammad Fahad Iqbal
PACRA assigned 'Positive Outlook' to the ratings of Makson Textile.
The ratings reflect modest business profile of Maksons Textile (Private) Limited (the Company), depicted by its niche market operations and adequate margins. Lately, Margins came under pressure as cost of imported yarn increased without commensurate rise in the Company's products in export market though improved lately. The top line of the Company increased by ~13% in 1HFY20 due to higher demand. The ratings incorporate the Company's experienced management team along with effective control environment. The withdrawal of zero-rated sales tax status from textile sector coupled with the high interest rates, has impacted liquidity and profitability of textile industry but the Company has managed to perform well despite the ongoing issues. With planned BMR activities in the short-term, the Company is expected to bring efficiencies and growth, going forward. The Company's financial risk profile which was under stress, improved, characterized by moderate leveraging and coverages. The leveraging decreased during 1HFY20 on account of lower short-term borrowings. The ratings account for financial strength of the Company's sponsors - AL-Tariq Group - having strong presence in engineering and trading segments. Although Makson's performance is improving, the uncertainty regarding the impact of COVID-19 is yet to be seen.
The ratings are dependent on improving margins, in turn, profitability and ensuing cash flows. 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.
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.