Press Release

VIS Assigns Preliminary Rating to the Instrument of Mughal Iron & Steel Industries Limited

Karachi, October 05, 2020: VIS Credit Rating Company Limited (VIS) has assigned the preliminary rating of ‘A+’ (Single A Plus) to the proposed Sukuk issue of Mughal Iron & Steel Industries Limited (MISIL). The medium to long-term rating of ‘A+’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. MISIL also has an outstanding entity ratings of ‘A/A-2’ (Single A/A Two). Outlook on the assigned ratings is ‘Stable’.

MISIL is positioned amongst the major players in the long steel sector of Pakistan. Product portfolio of the company comprises steel rebars, girders and t-iron. Steel rebars and girders are the key revenue generating products. The assigned ratings take into account extensive experience of sponsoring family. The ratings draw comfort from sizeable scale of melting and re-rolling mill capacities, underpinned by installation of new furnaces and completion of balancing, modernization and replacement (BMR) of existing re-rolling mill in 4Q2020.

MISIL intends to issue rated, listed, secured and privately placed long-term Sukuk of amount upto Rs. 3b (inclusive of a green shoe option of Rs. 1b) for meeting working capital requirements. Tenor of the Sukuk will be 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) will be maintained with the agent bank which will be build up with one-third of the installment (principal plus profit) each month by the 25th day such that the entire upcoming installment is deposited in the DPA by the 15th day of 3rd month.

With the issuance of Sukuk instrument and higher short-term borrowings for working capital requirements, leverage indicators are projected to increase in FY21 and decrease subsequently. Going forward, the ratings are dependent on achievement of projected revenue and profits, improvement in cash flow generation and coverages, and maintenance of leverage indicators within prudent limits.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk


Faryal Faheem Ahmed
Deputy CEO
VIS Entity Rating Criteria: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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