Press Release

JCR-VIS Assigns Initial Ratings of BBB+/A-3 to Muhammad Shafi Tanneries (Pvt.) Ltd.

Karachi, February 1, 2012: JCR-VIS Credit Rating Company Ltd. has assigned initial entity ratings of ‘BBB+/A-3’ (Triple B Plus/A-Three) to Muhammad Shafi Tanneries (Pvt.) Ltd. Outlook on the assigned rating is ‘Stable’.

MST is part of the Shafi group of companies having presence in the leather, textile, dairy and food sectors. In addition to being engaged in tanning operations, MST is also the holding company of various group entities. Of the equity of Rs. 1.8b of MST, almost Rs. 1.2b has been deployed in associates & subsidiaries. Profitability of most of the companies in the portfolio has showcased improvement in FY11 and the management does not anticipate cash calls from the same in the foreseeable future. The risk profile of investments will be tracked by JCR-VIS for impact on MST, if any. As and when dividend streams develop from the subsidiaries and associates, it will provide diversification to revenues of MST.

The management of MST has significant experience in the leather sector in addition to being professionally qualified. Capacity utilization of the company’s 24m sqft tannery has increased in FY11. While sales had also increased during the out-going year, margins were lower and further compression may be expected in FY12 as raw material prices have continued their upward trajectory. In a bid to maintain margins, the company has increased focus on value addition and diversified its product line with increased use of cow hides, in addition to the goat and sheep skins currently used in the tanning process.

Borrowing requirements are only short term as no major capex is planned in the near to medium term. Given the seasonal built up of inventory, a significant amount of funds remain tied up in working capital finance. The company is expected to be able to sustain the pressure on margins, if debt levels are maintained within prudent limits.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 (10 lines) or fax to 35311873.

Syed Ziauddin Ahmed

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2012 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited