PACRA Assigns Initial Entity Ratings to Mekotex (Private) Limited

Lahore, February 04, 2019 (PPI-OT): The ratings highlight the company’s strong business prospects reflected by growing revenues and profitability. The ratings incorporate strong business acumen of the sponsors, making Mekotex group a vertically integrated textile unit, and recent initiatives to strengthen the governance framework. The company is a composite unit of textile from ginning to printing and has diversified from denim to greige fabric. Margins remain inline with good players in the market. The company has adequately invested in BMR and expansion projects to remain competitive and ensuring technological upgrades.

This has helped in capturing growing demand in the local market, while export markets are pitched through group businesses – Kam International and Kam Apparel. The financial risk profile is relatively stretched, reflected by adequate coverages since cash flows from recent expansion are yet to fully materialize. Comfort is drawn from sponsors commitment and support, demonstrated in the form of interest-free loan mechanism. The financial matrix is expected to remain well managed. Annual turnover of the group exceeds USD 160mln per annum.

Ratings are dependent upon sustenance of topline growth, capitalizing on ongoing BMR and expansion initiatives, and conversion in profitability. This, in turn, should benefit in better debt service coverage ratios. Improvement in reporting mechanism and governance framework would be critical for the ratings.

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