Lahore, December 31, 2018 (PPI-OT): The ratings reflect sound business profile of Reliance Weaving Mills Limited (Reliance Weaving). The company’s revenues are on a growing trajectory over the years, a factor of continuous BMR translating into operational efficiencies and higher production volumes. Over the years, the company has sustained its overall margins, despite challenging textile industry dynamics. Moreover, re-imposition of custom duties and sales tax on cotton and yarn imports, coupled with increasing interest rates has made it challenging for the local textile industry.
While on standalone basis, the rupee devaluation has provided a requisite breather to the company, reflected in improving margins. Fatima Group has parked a strategic investment in energy sector on Reliance Weaving’s books. However, major investment portion is in development stage and is not expected to provide returns in near future.
The company has a relatively stretched financial profile. This is reflected in higher short-term debt vis-à-vis self-liquidating current assets. Cognizant of these issues, the management is in process of re-profiling its balance sheet in favor of long term debt. The assigned ratings incorporate strong sponsors support demonstrated by explicit guarantee provided by majority sponsors on all debt related obligations of the company.
The ratings are dependent on the management’s ability to prudently mange the liquidity and debt profile of the company, particularly working capital, while sustaining its business margins. Going forward, support from sponsors would remain important.
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