Agha Steel awarded highest corporate rating

JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of 'A/A-1' (Single A/A-One) to Agha Steel Industries (ASI). Outlook on the assigned ratings is 'Stable'. Agha Steel is amongst the top-tier players in the long steel sector with installed capacity of billets and reinforcement bars (rebars) at 240,000 MT and 150,000 MT respectively. Competitive advantage stems from the company being the only manufacturer in the country using Electric Arc Furnace for manufacturing of billets.
ASI's capacity utilization level of bars stood at 91 percent during FY17 compared with 85 percent during FY16. In order to cater to rising demand, ASI is in the process of expanding its rebar capacity by 5 times. The expansion will be funded through a mix of debt and equity. The equity portion will be funded through a planned Initial Public Offering in 1QCY18.
Executive Director, Hussain Agha notes, "The rating that Agha Steel Industries has received is a testament of our commitment to all our stakeholders by constantly delivering sustainable value. Furthermore, we are very confident that Agha Steel is well positioned to lead the steel industry of Pakistan by deploying state of the art technologies coupled with great corporate governance."
The assigned ratings to ASI incorporate improving financial risk profile as evident from decline in leverage indicators and adequate cash flows in relation to outstanding obligations. Ratings also reflect strong demand dynamics of the steel sector on the back of higher infrastructure development and demand for housing. Moreover, improving corporate governance framework is also an important rating driver.
Overall sectoral risk is considered high given the fragmented nature of the industry, expected increase in competition post capacity expansion by major players (three of the major existing players are increasing their capacity by over 3(x)), cyclical nature of the industry and the threat of dumping particularly from China.
However, outlook for the sector has witnessed noticeable improvement on the back of robust demand, imposition of regulatory and anti-dumping duties (imposed on imported billets & expected to be imposed on rebars) and enhanced efficiencies of top-tier players post capacity enhancement. Agha Steel Industries being an unlisted company has received the highest public unlisted company rating in the steel industry of Pakistan by credit rating agency JCR-VIS ratings.-PR