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Karachi, VIS Credit Rating Company Limited has reaffirmed the ‘A+’ rating for the Sukuk 3 instrument of Agha Steel Industries Limited (ASIL), reflecting a stable outlook and good credit quality with adequate protection factors, a news release by VIS Credit Rating Company Limited. The latest rating action, announced today, follows a previous assessment on August 25, 2023.
According to VIS Credit Rating Company Limited, a key player in Pakistan’s steel industry since its inception as a private limited company on November 19, 2013, and its transition to a public limited company on April 7, 2015, has been listed on the Pakistan Stock Exchange since November 2020. The company specializes in producing and selling steel bars, wire rods, and billets, operating from its main facilities at Port Qasim Authority in Karachi.
On August 17, 2023, ASIL issued a Sukuk valued at PKR 3.4 billion, primarily to prepay its previous outstanding Sukuk issue. This instrument, with a four-year tenor and a 1.5-year grace period, is secured through a first pari-passu hypothecation charge on all current and future fixed assets, along with an equitable mortgage charge on the company’s rights in immovable property, each with a 25% margin. The instrument also includes a Sponsor Support Agreement, requiring cash equity injections from sponsors in case of shortfalls, and mandates monthly deposits into a Debt Payment Account for upcoming coupon payments.
The reaffirmed rating considers the high business risk within the long steel industry, marked by cyclical trends and intense competition. Nevertheless, ASIL’s technological edge is noted as a mitigating factor supporting the rating. The company’s financial profile, impacted by market contraction and macroeconomic challenges in FY23, demonstrated resilience with healthy gross margins attributed to operational efficiencies and technological advancements, including the Electric Arc Furnace and Mi. Da. Rolling project.
While the company experienced some deterioration in its liquidity and coverage profiles in FY23, these aspects have since recovered to adequate levels by 1QFY24. The upcoming issuance of a green bond is expected to exert slight pressure on the company’s capitalization profile.
For more details on this rating announcement, interested parties can contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 201) at VIS Credit Rating Company Limited at 021-35311861-64 or via email at info@vis.com.pk.
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