Pakistan Credit Rating Agency Limited assigns entity ratings to Amreli Steels

Lahore, October 28, 2016 (PPI-OT):PACRA has assigned Long-Term and Short-Term entity ratings of ‘A’ (Single A) and ‘A1′ (Single A One), respectively, to Amreli Steels Limited. These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings reflect continuous improvement in Amreli Steels’ business profile supplemented by strong local demand fundamentals. Business margins have maintained a positive trend – a factor of notable decline in price of imported scrap, a key raw material. Meanwhile, financial risk profile has depicted steady, yet significant, improvement reflected by healthy cash flows and low leveraged capital structure; resulting in strong debt service coverages. This, in addition, is augmented by cash proceeds from IPO, which are utilized to finance Amreli Steels’ on-going expansion in re-rolling (from 180,000 to 480,000tpa) and billet (from 200,000 to 350,000tpa) capacities.

The project will be equity financed. It is expected to start commercial operations in 1QFY18. However, the company has stepped up efforts to ensure supportive supply chain to utilize enhanced capacities in a timely manner. Meanwhile, regulatory protection to the finished product (rebar) is an added advantage for the sector; continuation of the same is important to generate good business margins.

The company is strengthening its organizational structure; senior executives with relevant expertise are being engaged to meet needs of growing business. In line with listing requirement, formality in governance structure has been witnessed; effectiveness is likely to improve with time. The ratings draw comfort from strong business acumen of Amreli Steels’ sponsors – Akberali Family – and business prospects which directly correlate to expected domestic infrastructure activity.

The ratings are dependent on the management’s ability to sustain its business profile while benefiting from positive demand fundamentals. Effective implementation of governance framework and prudence in financial structure remain important.

For more information, contact:
Hammad Rashid
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425