PACRA Assigns Initial Entity Ratings to Salfi Textile Mills Limited

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PACRA Assigns Initial Entity Ratings to Salfi Textile Mills Limited

December 3, 2018

Lahore, December 03, 2018 (PPI-OT): Salfi Textile Mills Limited – a public listed company, primarily engaged in the manufacturing and sale of different varieties of yarn is majorly owned by Mr. Anwar 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 Salfi’s margins and in turn profitability. The ratings of Salfi incorporate its working capital cycle which remain stretched despite improvement in profitability.

The financial risk profile of the company is characterized by well maintained leveraged capital structure, however coverages remain under pressure due to relatively small size of cashflows. Amidst rising interest rates coverages may stretch further. 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 improving its financial risk via improved core coverages. Meanwhile, prudent management of short term liquidity would be rating essential. Going forward, materialization of successful merger of all three textile entities would be significant to rating.

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

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