Press Release

VIS Credit Rating Company Reaffirms Entity and Sukuk Ratings of Agha Steel Industries Limited

VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Agha Steel Industries Limited (ASIL) at ‘A/A-2’ (Single A/A-Two). Rating of the outstanding Sukuk has also been reaffirmed at ‘A+’ (Single A Plus). Outlook on the assigned ratings is ‘Stable’. Long Term entity rating of A reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of A-2 indicates good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Previous rating action was announced on January 18, 2021.

Agha Steel Industries Limited (ASIL) is amongst the top-tier players in the long steel sector with installed capacity of billets and reinforcement bars (rebars) at 450,000 MTs and 250,000 MTs, respectively. In November 2020, the company had its IPO, which generated funds for partial financing of phase two of the company’s expansion plan. The expansion project is expected to be completed in the next 8-10 months. Once plant becomes operational, the capacity of bars shall go up to 650,000 MT.

The assigned rating takes into account the business risk of the long steel sector, which is considered relatively high because of the sensitivity to changes in exchange rate, and volatile nature of raw material prices. However, the risk profile is supported by a positive demand outlook and technological competitive edge of the company. ASIL is the only company in the industry that uses Electric Arc Furnace for manufacturing billets, and the completion of phase two entailing continuous casting and rolling process is expected to further enhance the operational efficiency.

Assessment of financial risk profile incorporates increasing topline, stable profitability indicators, improving liquidity and capitalization indicators. As the economy continued to recover in FY21 after the COVID-19 induced slowdown, revenue of the company exhibited a significant increase during the period and 1HFY22. Government’s emphasis on the construction sector proved to be a catalyst in this regard and the growth trend is projected to continue in near future. Despite a sharp rise in raw material prices, ASIL was able to maintain its margins for the assigned ratings, which ultimately led to a higher net profit in line with increasing revenue. Going forward, profit margin is expected to remain range-bound because of rising finance cost. Cash flow indicators have shown some improvement at end-FY21 due to increasing profit. However, debt servicing ratio and coverage for short-term debt have declined at the end of the period because of an increase in the quantum of debt to finance working capital requirements. Further improvement in liquidity profile is considered important. Capitalization indicators have improved on a timeline basis supported by profit retention and IPO proceeds. Hence, timely completion of the expansion project and availability of financial support from sponsors is important from ratings perspective.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 201) at 021-35311861-71 or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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