Press Release
VIS Assigns Final Rating to Sukuk 5 Issue of Mughal Iron and Steel Industries Limited
Karachi, May 30, 2025: VIS Credit Rating Company Limited (VIS) has assigned final rating of 'AA-' (Double A Plus) to the proposed Sukuk 5 of Mughal Iron and Steel Industries Limited (‘’MISIL’’ or ‘’the Company’’). The medium to long-term rating of 'AA-' denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on February 25, 2025.
The Company has issued a rated, secured, privately placed Sukuk of up to PKR 2,500 million on April 18, 2025, with a tenor of 15 months and principal repayment structured as a bullet at maturity. Profit is payable quarterly in arrears at a rate of three-month average KIBOR plus 145 bps. A Debt Payment Account (DPA) will be maintained, with profit payments deposited five working days prior to due dates. For principal, one-third will be deposited on the 60th day and the remaining on the 75th day of the final quarter. A Debt Service Reserve Account (DSRA) of PKR 165 million is to be maintained from issuance in an AA- rated bank under lien. Security includes a first joint pari passu charge with a 25% margin.
The assigned rating factors in the credit enhancements as stipulated in the Sukuk structure, with respect to security provided together with maintenance of DSRA and DPA accounts. The rating also reflects the elevated business risk profile of Pakistan’s steel bar industry, which is subject to demand volatility, dependence on imported raw materials, and energy-intensive operations. Industry demand remains subdued, closely linked to construction activity, infrastructure development, and housing projects. The financial profile assessment reflects revenue growth in FY24, driven by higher volumes and prices across both ferrous and non-ferrous segments. However, margins remained constrained due to inflationary pressures and high energy costs. The Company continues to benefit from a diverse product portfolio, including export revenues from copper ingots. Liquidity metrics remain adequate. However increased reliance on debt for working capital and capital expenditures impacted capitalization and coverage metrics in FY24 and 3QFY25. Management anticipates improvement in financial risk profile with benefits of declining interest rates. Additionally, the Company projects operational cash flow growth driven by increased ferrous segment volumes and cost savings from captive power generation.
Going forward, the assigned rating will remain sensitive to the Company’s ability to achieve its projected plans. Sustaining its business risk profile, along with enhancing coverage metrics will remain crucial for rating.
For further information on this rating announcement, please contact 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates Rating
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Applicable Rating Criteria: Instrument Rating
https://backupsqlvis.s3.us-west-2.amazonaws.com/Methodologies-2025/IRM-Apr-25.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingcales.pdf