Lahore, February 28, 2018 (PPI-OT): The rating reflects company’s business risk profile which is characterized by sizeable revenue base, adequate profitability, and requisite return on equity. Depressed topline growth is the characteristic of decline in exports, an industry phenomenon. Strength of company’s financial risk has provided requisite breather to the overall profile, emanating from efficient working capital management and healthy liquidity position. On standalone basis, debt service coverages are adequate. Fazal Rehman Fabrics has embarked upon expansion in its weaving capacities; adding 96 air jet looms – in two phases.
First phase of expansion of 66 looms, with an estimated cost of PRK 1.1bln (debt: equity – 70:30) is expected soon. Therefore, further accumulation of debt has added to the standalone financial risk. Nevertheless, financial support and corporate guarantee against financial obligations from parent company provides comfort. Fazal Rehman has a leveraged capital structure and maintains short term lines which may be utilized in case the need arises.
The ratings are dependent on the management’s ability to uphold the entity’s risk profile. Meanwhile, prudent management of expansion-related debt, post-expansion cashflows, and parent company’s support will be important to support the financial profile of the company.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Category: General Business News