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The Pakistan Credit Rating Agency Limited

Date
31-Aug-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Aman Zafar
aman.zafar@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Holding Companies (Jun 17) [View]

Related Research

  • Sector Study | Holding Company (Jun 17) [View]
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PACRA Assigns Initial Entity Ratings to Fazal Holdings (Pvt) Limited
 Rating Type Entity
Current
(31-Aug-2017)
 Action Initial
 Long Term A
 Short Term A1
 Outlook Stable
 Rating Watch -

Fazal Holdings (Pvt.) Limited (FHPL) is an investment holding company for Fazal group. Its investment portfolio comprises a combination of core investment (held for long - term) and trading investment (with short to medium - term time horizon). As per policy, active trading is minimal. The portfolio comprises a combination of established and developing companies. FHPL investments spread across diverse sectors of economy. The ensuing dividend stream from the investments supplements FHPL's revenues, which also emanate from capital gains. Sponsors intend to expand FHPL. Consequently, profits are being retained and any surplus funds, elsewhere in the group, are also routed to FHPL. The company has designed a conservative leverage policy according to the size of investment book. This should help absorb the effects of volatility in stock market on assets of FHPL and keep financial risk manageable. Investment decisions are led by Mr. Rehman Naseem. He gets assistance from resources within Fazal group and certain research/brokerage houses. Herein, institutionalization would be beneficial.

The rating is dependent on management's initiatives to strengthen mechanism for monitoring performance of underlying investments. This would facilitate FHPL's assimilation into an effective holding company. Any unforeseen downturn in the capital market and/or material performance weakening at investee companies adversely impacting the company's risk absorption capacity would have negative implications for the ratings. At the same time, adhering to agreed financial matrix and keeping debt coverages at adequate level is critical.
About the Entity
Fazal Holdings (Pvt.) Limited (FHPL) was incorporated in April 1995 under different name Amir Fine Exports (Pvt.) Limited. The company is engaged in investing in quoted and unquoted securities. The registered office of the company is situated in Multan.

The overall control of the company vests in two board of directors. Mr. Rehman Naseem is the chairman of board. The other board member is Mrs. Mahnaz Amir. FHPL is equally owned by Mr. Rehman Naseem and his brother Mr. Amir Naseem; directly and through their family members.

Fazal group is one of the renowned textile groups in Pakistan. It is engaged in the business of cotton ginning, ring spinning, and greige fabric manufacturing. It currently owns and operates six ring spinning units comprising 275,880 spindles (Fazal Cloth – 4 units: 190,392, Fazal Weaving Mills: 39,600, Ahmed Fine Textile Mills: 45,888); one open end unit comprising 2,220 rotors and two weaving units comprising 464 air jet looms (Fazal Cloth: 224, Fazal Rehman Fabrics Limited: 240). In addition to textile, the group has interest in Fertilizer, Energy and Real Estate sectors.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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