Press Release

VIS Maintains Entity Ratings of Muhammad Shafi Tanneries (Pvt) Ltd (MSTL)

Karachi, July 26th , 2021: VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of Muhammad Shafi Tanneries (MSTL) at ‘A-/A-2’ (Single A minus/A-Two).The long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short term rating of A-2 indicates good certainty of timely payments coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings has been revised from ‘Rating Watch Developing’ to ‘Negative’. The previous rating action was announced on June 30th, 2020.

This revision in rating outlook reflects slowdown in leather industry aggravated with the onset of COVID-19. Demand dynamics also depict a shift towards artificial leather to contain environmental degeneration and diversion from leather due to its comparatively higher prices. This has presented a challenging environment for MSTL with revenues being impacted adversely. Sales are expected to remain subdued as competitive pressures continue to rise. Exposure to European markets, which have been more severely affected by COVID-19, has led to a more pronounced impact for the company.

The assigned ratings incorporate significant reduction in debts levels emanating from liquidation of short term investments and support from associated companies easing pressure on debt service coverage and resulting in low leverage indicators. Ratings also factor in adequate liquidity profile despite weaker profitability resulting from decline in export volumes and margins. Investment income from associates has provided support to the bottom line of the company to some extent.

Management plans to diversify its customer base by exploring new markets as well as considering other variants of leather with better demand prospects. Going forward, improving core business profitability while maintaining low leverage and sustaining equity base will be important for assigned level of ratings.

For further information on this rating announcement, please contact Ms. Sara Ahmed (Ext: 207) or the undersigned (Ext: 202) at (021) 35311861-66 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)

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