PACRA Initial Entity Ratings of Basfa Textile (Private) Limited

Lahore, December 29, 2017 (PPI-OT):The ratings reflect adequate business profile of Basfa Textile (Pvt) Ltd. The company is engaged in the manufacturing and sale of Viscos Yarn – a premium quality yarn and different varieties of cotton yarn. Sponsor’s primary business interest is in car paint and chemical raisins. However, their most recent investment was in textile sector i.e. Basfa Textile. Textile industry in general and spinning industry in particular continues to suffer from low international commodity prices and high cost of doing business in Pakistan.

Meanwhile, despite the announcement of export incentives by the state, materialization of the same is low. Consequently, performance volatility, featured by cotton price fluctuations, is considered high on standalone basis. Company has successfully created it niche market in viscose yarn, which provided stability to the margins, boded well with the overall profitability. Company has minimal long-term debt which keeps the financial risk profile at low level. Efficient working capital management and sustained cash flows, in turn healthy coverages keep the financial risk profile sound. However, governance framework and financial transparency needs improvement.

The ratings are dependent on sustaining business margins in viscose yarn while maintaining financial risk at low level. Uplifting of financial risk profile via improved core coverages would be ratings positive. At the same time, prudent management of short-term liquidity is considered important.

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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