PACRA Assigns Initial Entity Ratings to Island Textile Mills Limited

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PACRA Assigns Initial Entity Ratings to Island Textile Mills Limited

December 3, 2018

Lahore, December 03, 2018 (PPI-OT): Island Textile Mills Limited – a public listed company, primarily engaged in the manufacturing and sale of different varieties of yarn is majorly owned by Tata family. Tata Group currently owns three textile mills i.e. Island, Salfi and Tata Textile Mills Limited. The group is also diversified into power and food sectors. Due to higher demand in local market recently the group has shifted its focus from export sales which led to increasing its footprints in the local market.

Textile industry in general and spinning industry in particular has benefitted from recent devaluation of currency despite higher cotton prices. However, on standalone basis prudent cotton procurement lead to improvement in Island’s margins and in turn profitability. Island Textile enjoys strong margins in comparison to its peers due to its automated plant and ensuing operational efficiencies.

The ratings of Island capture the working capital cycle of the company which is stretched due to increased inventory days, though in line with the peers. The financial risk profile of the company is characterized by well furnished coverages, however, capital structure is relatively leveraged. Long association of experienced and professional management team adds comfort. Going forward, management is planning to merge all three textile entities in order to benefit from the economies of scale.

The ratings are dependent on sustaining business margins while maintaining financial risk at low level. Prudent management of short-term liquidity and leveraging moderation would be rating essential. Going forward, materialization of successful merger of all three textile entities would be significant to rating.

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

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