Press Release

VIS Maintains Entity Ratings of Muhammad Shafi Tanneries (Private) Limited

Karachi, June 30, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Muhammad Shafi Tanneries (Private) Limited (MSTL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Rating Watch-Developing’. The long term rating of ‘A-’ signifies good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small. The previous rating action was announced on May 2, 2019.

The assigned ratings incorporate improving trend in revenues, margins and core operating profitability of the company while capitalization and leverage indicators remain sound. Ratings also factor in challenging operating environment for leather manufacturers with subdued global demand for leather products. Existence of sizeable portion of non-earning assets in the form of investments and loans to subsidiaries/associates on MSTL’s balance sheet and market risk emanating from equity market exposure are constraints on profitability. Going forward, ratings are dependent on achieving targeted sales for the ongoing year while maintaining profitability of core operations and sound capitalization levels.

Liquidity profile of the company has improved with lower quantum of debt. Equity base has grown over the years on account of consistent profits generated by the company. Management does not plan to extend undertake further investments/loans to its subsidiaries/associates over the rating horizon.

The revision in rating outlook reflects prevailing uncertainty in leather sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in global demand and challenging economic environment. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch-Developing’ status. Given the capital structure and financial profile, it is expected that ratings will remain stable post recovery of the ongoing situation; nevertheless as scenario is evolving rapidly, VIS will closely monitor and will accordingly take action to resolve the outlook status.

For further information on this rating announcement, please contact the undersigned (Ext: 306) or Mr. Muhammad Ibad Desmukh (Ext: 205) at 021-35311861-71 or fax to 021-35311872-3.

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited