Press Release

VIS Maintains Sukuk-1 Instrument Ratings of Mughal Iron & Steel Industries Limited

Karachi, December 8, 2023: VIS Credit Rating Company Limited maintains instrument ratings of 'A+' (Single A-Plus) to the Sukuk-1 issue of Mughal Iron & Steel Industries Limited (‘MISIL’ or ‘the Company’) 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. Sukuk ratings are in line with entity rating of ‘A+/A-1’ (Single A-Plus/A-One). Previous Rating action was announced on March 31, 2023.
Mughal Iron & Steel Industries Limited was established on February 16, 2010, is a public listed company traded 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 facilities include manufacturing plants and warehouses on Sheikhupura Road, Lahore, and sales centers in Badami Bagh, Lahore.
MISIL issued a PKR 5.0 bln Listed, Secured & Privately Placed Long-Term Islamic Certificates (‘Sukuk’) with a Green Shoe option of PKR 2 bln. The Sukuk has a 5-year tenor, priced at 3MK+1.3% p.a., with quarterly profit payments. A Debt Service Reserve Account (DSRA) is maintained, equal to one full upcoming installment, under lien of the Invest Agent throughout the facility's tenor. During the grace period, DSRA accumulates for one profit payment. Besides DSRA, a debt payment account (DPA) is maintained, with one-third of the upcoming installment deposited monthly by the 25th day. The security structure involves a first pari passu charge over all present and future movable assets, with a 25% margin.
Assigned ratings incorporate the high business risk profile attributed to the long steel industry in Pakistan. This risk is underscored by the sector's exposure to economic cyclicality, foreign exchange rate fluctuations, volatility in international steel prices, and a challenging competitive environment. FY23 witnessed a constrained economic landscape marked by floods, inflation, currency depreciation, and dwindling foreign reserves, leading to a contraction in the GDP and reduced market size in the sector.
Assigned ratings also consider the profitability risk profile of MISIL, acknowledging the decline in topline, gross margins, and profitability in FY23. The capitalization and liquidity profile remain adequate with assigned ratings. However, the coverage profile reported a deterioration in FY23 on account of a significant increase in the country’s policy rates during the period under review.
Going forward, ratings will remain sensitive to the Company’s ability to improve its profitability, and coverage metrics. While continued support from non-ferrous segment as well as maintenance of capitalization and liquidity metrics commensurate with assigned ratings will also be important considerations.
For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at

Sara Ahmed

Applicable Rating Criteria:
Industrial Corporates (May 2023)
Rating the Issue (August 2023)
VIS Issue/Issuer Rating Scale

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