PACRA Assigns Entity Ratings to Al Barka Fabrics Private Limited.
The assigned ratings of Al Barka Fabrics reflect adequate positioning of the company in the Processed fabrics, home-textile and made-ups industry. AL Barka Fabrics is flagship company of AL Barka Group. The group has long standing association with the textile sector. The group is eying diversification in other sectors in upcoming years. The Company has been operational as a private company principally engaged in Textile Processing (Bleaching, Dying, Printing, Stitching). Governance framework lacks independent oversight. The Company’s management involves experienced professionals looking after operations of the Company. The business profile emanating from in the broader value-chain; enabling the company to manage volatility in the textile industry. Sales mix, dominated by exports, display steady improvement over the years. The Company enjoys established customer base with several export destinations in Europe, South America, Russia and UK. Revenues are majorly driven by exports where the company enjoys long association with customers abroad. During FY21, the Company’s revenues increased to PKR 4.3bln (FY20: PKR 2.3bln), primarily exports. Operating profits and net profitability recorded sizable improvement in the recent year. Net profitability also witnessed improvement whilst margins remained strong. Management of receivables is essential. The Company continues to maintain moderately leveraged capital structure and good coverages.
During the period July-December FY21-22, textile exports of the country surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. Going forward, the textile sector’s outlook is expected to stay positive in the medium term where the demand for textile products is expected to sustain. In the local market, the textile sector has recorded strong performance. The relief measures introduced by the State Bank of Pakistan such as deferment of loan payments for one year, low-interest rates, and salary refinance scheme also provided comfort to the sector. Many players have also availed the TERF scheme announced by the Central Bank. This will lead to overall leverage of the sector to increase; however, on relaxed financing rates. The sustainability of demand pattern for the current higher orders from Europe and USA remains essential for the feasible utilization of added capacity by textile players.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at optimal level and sustain margins, going forward. The company is expected to adhere to conservative financial discipline, which would be crucial to ratings.
The Company was incorporated in 1998 as a private limited company. The core operation of the business is Textile Processing (Bleaching, Dying, Printing). Manufacturing facility is located in Faisalabad, area known as 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 owns equal proportion of remaining shares. There are four board members in place, all from the sponsor family.