PACRA Assigns Initial Entity Ratings to Mughal Iron and Steel Industries Limited

Lahore, January 29, 2018 (PPI-OT):Mughal is a known name in the steel industry. The company has diversity in its product slate; Rebars, T-Iron and Girders etc. The company profiling has significantly improved post listing on PSX. Mughal has a large board with one independent director (Mr. Salman Ali Shah) and has plans to increase the same in line with corporate governance requirements. Mughal has a sizeable capacity to an extent unutilized. The ratings take strength from strong brand value of Mughal Steel in the local industry.

The company has attained formidable market share; amidst rising demand emanating from large infrastructure projects. Demand from retail segment is also on the rise – earmarked by the management as future growth driver. The ongoing expansion projects – 100% financed through equity – have positioned Mughal to take advantage of rising demand. During FY17, Mughal witnessed dilution in margins as it competed with dumped steel products originating from China, however, the situation is likely to improve post anti-dumping duty.

Mughal unlike south players have to incur freight cost – that explains its differential in margins. The ratings incorporate Mughal’s adequate financial risk profile which has sustained over the years. The short term borrowings (net of cash) are largely aligned with the working capital. Moreover, leveraging has improved on account of successful capital market transaction (100% right issue at par) during the year, which has augmented equity. Going forward, with no major addition in debt, coverages are expected to remain robust.

The ratings are dependent upon the company’s ability to sustain its business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, strengthening of governance framework is vital.

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
Email: hammad.rashid@pacra.com
Web: www.pacra.com