Press Release
VIS Reaffirms Entity Ratings of Muhammad Shafi Tanneries (Private) Limited
Karachi, March 5, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Muhammad Shafi Tanneries (Private) Limited (‘MSTL’ or ‘the Company’) at 'BBB+/A-2' (‘Triple B Plus’/’A-Two’). Medium to long term rating of 'BBB+' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains ‘Stable’. Previous Rating action was announced on May 09, 2023.
Muhammad Shafi Tanneries (Private) Limited is a family-owned company, engaged in the business of manufacturing and exporting finished leather. MSTL belongs to Shafi Group which has presence in the textile (Shafi Texcel Limited-STL), food (Everfresh Farms-EFPL, Shafi Foods- SFPL) and footwear sectors. The registered and head office of the Company is located at 35-A/3, Lalazar, Opposite Beach Luxury Hotel, Karachi. The manufacturing plant is situated at D-196/A, Haroonabad, SITE, Karachi.
Assigned ratings incorporate the medium business risk profile attributed to the leather sector, characterized by its export-oriented nature. This aspect shields it from significant local economic factors such as currency depreciation and inflation. Moreover, with high reliance on locally sourced raw materials exchange rate risk is further mitigated. However, sector’s sensitivity to cyclicality in international markets is also noted.
Assigned ratings also consider the financial risk profile of the Company. The profitability profile reflects growth in the top line driven by increased exports and local sales, coupled with improved gross margins due to net-benefit from currency depreciation. However, escalating finance costs constrained net margins. The capitalization profile remains conservative, with minimal debt on the balance sheet. The liquidity profile continues to remain healthy. Meanwhile, the Company has managed to recover its coverage profile, after two challenging years. MSTL’s debt servicing ability has recovered to levels commensurate with the assigned ratings.
For further information on this ratings announcement, please contact Saeb Muhammad Jafri at 021-35311861-64 (Ext. 202) and/or the undersigned at 021-35311861-64 (Ext. 201) or email at info@vis.com.pk.
Javed Callea
Advisor
Applicable Rating Criteria: Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf