Lahore, June 25, 2021 (PPI-OT):The ratings reflect moderate business risk profile of Reliance Weaving Mills Limited (“Reliance Weaving” or “the Company”) emanating from volumetric growth in exports and better pricing. Over the years, the Company has undertaken continuous BMR translating into operational efficiencies and higher production volumes. The Company has improved its overall margins despite the higher cotton price. Moreover, the Company has ramped up the capacity utilization significantly, in both spinning and weaving segments, give a comfortable picture, ahead. Going forward, the Company aims to undertake further expansion into spinning and weaving, financed through a mix of internal and external sources.

Recent induction of independent directors on the Board has improved governance structure. The Company has a sizeable strategic investment in the energy sector in a group company. Reliance Weaving has a relatively squeezed financial capacity when considering leverage. However, the Company has availed moratorium relief, hence principal repayments are deferred for a year. Ratings positively take in to account the track record and presence of experienced and professional management team which possesses considerable experience in the textile business. The assigned ratings incorporate strong sponsors support and the explicit guarantee provided by majority sponsors on all debt related obligations of the Company. Moreover, synergies between the group companies are considered positive.

The Positive Outlook signifies the improved revenue and profitability along with the other improved financial parameters. Moreover, comfort can also be drawn from the business risk profile backed by the healthy growth in the business correspondent space as well as benefits from the strong financial position of the sponsors. 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 and improving its business margins. Going forward, support from sponsors would remain critical.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com