PACRA Maintains Entity Ratings of Rustam Towel (Private) Limited

Lahore, October 30, 2019 (PPI-OT): Rustam Towel (Pvt.) Limited (Rustam Towel), a small family run business concern, is a small scale export oriented towel manufacturer. Textile exporters are overall experiencing improved margins due to recent rupee devaluation. Furthermore, towel segment continues to surge forward on the back of Pakistan’s cotton, which is more suitable for making towels. These factors are reflected in the Company’s performance as its margins and profitability have improved.

On standalone basis, the Company’s concentration levels – both customer and geographical – are well managed with the Company having a policy of capping revenue from single customer to 20%. The Company has improved its working capital management. However, it continues to have negative room to borrow as its short term borrowings exceed trade assets. This mismatch negatively affects the financial profile. Coverages have also shown improvement as free cash flows have increased due to better profitability. Meanwhile, the Company is moderately leveraged and this is expected to remain stable as the Company does not plan to incur long term debt in the future.

The ratings are dependent on sustaining margins while improving business volumes. Meanwhile, prudent working capital management and eliminating mismatch would remain critical. Strengthening of governance framework for better oversight of strategic affairs, and appointment of enlisted auditor with SBP, is considered essential.

For more information, contact:
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com