Lahore, March 29, 2018 (PPI-OT): Rustam Towel (Pvt.) Limited (Rustam Towel) is small scale export oriented towel manufacturer, a family run business concern. Textile industry overall is witnessing suppressed margins due to international lower commodity price and higher cost of doing business in Pakistan. However, towel industry continues to surge forward on the back of Pakistan’s cotton which is more suitable for coarse counts yarn; resulting into better margins, which is also reflected in Rustam Towel’s profitability. On standalone basis, the company’s concentration levels – both customer and geographical – are well managed with company having policy of capping revenue from single customer to 20%.
The ratings reflect relatively stretched financial risk profile due to higher working capital requirements as compared to industry due to lengthy net cash cycle. Short term borrowings exceeds working capital requirement resulting in asset-liability mismatch. Going forward, in absence of any further debt-driven expansion in the medium-term and better working capital management, financial profile is expected to become better.
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