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 has issued rated, listed, secured and privately placed long-term Sukuk of amount up to Rs. 3bln (inclusive of a green shoe option of Rs. 1bln). 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.

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 info@vis.com.pk.


Sara Ahmed
Director

Applicable Rating Criteria:
Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Rating the Issue (August 2023)
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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