Press Release

VIS Reaffirms Instrument Ratings of Mughal Iron & Steel Industries Limited’s Sukuk I Issue

Karachi, November 18, 2024: VIS Credit Rating Company Limited reaffirms instrument ratings of Mughal Iron & Steel Industries Limited’s (‘MISIL’ or ‘the Company’) Sukuk I issue at 'A+' (Single A Plus) with a 'Stable' outlook. Medium to long term rating of 'A+' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Previous Rating action was announced on December 08, 2023.

Mughal Iron & Steel Industries Limited, established on February 16, 2010, is a public limited company listed on the Pakistan Stock Exchange Limited. Headquartered in Lahore, MISIL operates in both ferrous and non-ferrous segments, with a primary focus on manufacturing and selling mild steel products. The Company's manufacturing and warehousing facilities are located on Sheikhupura Road, Lahore, and the sales centers at Badami Bagh, Lahore.

MISIL has issued rated, listed, secured and privately placed long-term Sukuk of amounting to Rs. 3bln. Tenor of the Sukuk is 5 years including 1-year grace period. The instrument will be redeemed in 16 equal quarterly payments starting from 15th month from the date of issuance. Besides conventional security structure, a debt payment account (DPA) is maintained with the agent bank which is build up with one third of the installment (principal plus profit) by the 25th day of each month such that the entire upcoming installment is deposited in the DPA by the 15th day of 3rd month.

Assigned ratings take into account the business risk profile of the steel bar industry in Pakistan, which is characterized by high cyclicality, dependency on imported raw materials, and significant energy consumption. The industry faces challenges from demand fluctuations driven by construction sector performance, exposure to currency depreciation, and competitive market dynamics. Although government spending on infrastructure provides support, demand volatility persists due to economic cycles, inflationary pressures, and financing constraints, which impact private construction activities.

Assigned ratings also consider the Company’s financial performance marked by revenue growth in both ferrous and non-ferrous segments, attributed to increased pricing and quantum. However, input-cost inflation, currency depreciation, and energy expenses constrained gross margins. Liquidity remains adequate, though there was a slight contraction in key metrics. Capitalization levels increased with additional debt utilization, while coverage metrics reflect pressure from reduced operational income amid higher interest expenses. Despite lower funds generation from operations, management anticipates fulfilling near-term financial obligations through current liquidity, expecting improvement from enhanced exports of non-ferrous products and cost efficiencies accruing from captive power generation provide support to the long-term servicing needs.

Going forward, ratings remain sensitive to the Company’s ability to improve profitability margins, manage debt service coverage effectively and maintain adequate liquidity ratios considering high interest cost burden.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.

Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue Rating Criteria
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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