Lahore, August 31, 2020 (PPI-OT): The ratings reflect Fazal Rehman Fabrics Limited’s (Fazal Rehman Fabrics) favourable business profile characterized by sizable revenue base and healthy margins. Despite the lockdowns around the world, including Pakistan, the Company’s topline grew by ~5%. Fazal Rehman Fabrics possess a strong financial profile, emanating from robust working capital cycle and exceptional coverages. Whereas, reduction in relatively-high leverage during FY20, also bodes well. The leverage is expected to increase on account of the capacity expansion planned in the next financial year.
Moreover, the operations of the Company came to a halt during the last quarter (April-June) of FY20, on account of the COVID-19 outbreak. The entire textile chain suffered due to lockdowns in Pakistan and internationally. Production resumed after a week-long closure; since the Government allowed export-oriented sector to recommence operations, which included Fazal Rehman Fabrics. Nevertheless, Lower demand due to the pandemic, made the last quarter challenging for the Company. However, the demand is recovering of late, as economies around the world reopen.
In order to relieve pressure on cashflows caused by the pandemic and economic slowdown, the Company availed SBP’s moratorium relief and deferred principal repayments for one year. Reduction of 625bps in interest rates by SBP shall also provide respite in this regard. The Company has a sizable investment portfolio. Despite the conservative investment approach, the Company is exposed to the stock market volatility. The assigned ratings derive comfort from the Company’s association with Fazal Group.
The ratings are dependent on the management’s ability to uphold the entity’s strong business performance. Meanwhile, prudent management of cash flows and maintaining strong coverage to fulfill financial obligations arising from increased leveraging will be critical, going forward.
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