Press Release
VIS Reaffirms Entity Ratings of Mehboob Steel Pipes Industries
Karachi, May 21, 2025: VIS Credit Rating Company Limited (VIS) reaffirmed entity ratings of Mehboob Steel Pipes Industries (“MSPI” or “the Entity”) at 'BBB/A2' (Triple B/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 'A2' indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. The outlook on the assigned ratings remains “Stable”. Previous Rating action was announced on April 22, 2024.
MSPI was incorporated in 2004 as a partnership concern. The Entity imports hot rolled coils from various sources including China, Russia, and South Africa. MSPI produces steel tubes and pipes in various sizes and specifications based on customer requirements and market trends. The product portfolio encompasses a range of shapes including square, elliptical, rectangular, L-type, T-type, Z-type, and D-type. These products find application primarily in the construction sector, with additional uses in water, oil & gas, automobiles, furniture, housing, and scaffolding industries. Mehboob's manufacturing unit is in Hub, Balochistan, while the registered office is situated in Lahore.
Assigned ratings reflect the high business risk profile of Pakistan’s steel pipe and tube manufacturing sector, driven by pronounced sensitivity to macroeconomic conditions, cost structure, and competitive pressures. Sector demand remains closely linked to construction and industrial activity, exposing it to broader economic slowdowns. The contraction in sector volumes during the review period was attributed to reduced construction and infrastructure development, delays in public sector expenditure, and escalating project costs. The industry remains fragmented, with a significant presence of small to mid-sized operators, resulting in limited pricing flexibility and margin compression. Demand has also been affected by substitution from lower-grade imports and non-metallic alternatives. Elevated dependence on imported raw materials continues to exert cost-side pressure, while structural issues—such as regulatory disparities and uneven regional tax incentives—have further influenced market competitiveness and added to overall sector risk.
Assigned ratings also incorporate the financial risk profile of the Entity. Net sales remained steady during the period, supported by stable volumes despite prevailing macroeconomic challenges in FY24. Margins showed modest improvement during FY24, supported by cost control measures as per the management. However, gross margins declined in the ongoing FY25 due to sustained input cost pressures. The Entity’s capital structure remains conservative, with no long-term debt and limited reliance on short-term borrowing. Working capital requirements were partially met through extension of trade payables. Liquidity indicators remained stable, with the current ratio showing an improvement in the ongoing period, supported by internal cash generation and reduction in liabilities. Coverage indicators improved on the back of better profitability and easing interest rates, with the debt service coverage ratio reflecting adequate capacity to meet financing obligations.
Going forward, ratings will remain sensitive to sectoral demand recovery, cost management, and the Entity’s ability to maintain coverage and liquidity indicators. The continuation of internal funding strategies to meet working capital requirements without increasing leverage, along with sustained profitability margins, will be important for maintaining credit risk metrics. Any material deterioration in operational performance, liquidity position, or margin sustainability may exert pressure on the assigned ratings.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Corporate Rating
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf