Credit Rating Report (Surveillance)

M.M. Ispahani Limited

Ratings

M.M. Ispahani Limited

AA1

BDT 280.25 million aggregate Long Term Outstanding (LTO)

AA1 (Lr)

BDT 2,610.0 million aggregate Cash Credit (Hypo)* limit

AA1 (Lr)

BDT 2,120.0 million aggregate Fund based limit

ST-1

BDT 4,065.0 million aggregate Non-Fund based limit

ST-1

Outlook

Stable

Remarks
Entity
Please see
Appendix-1 for
details

Lr- Loan Rating, ST-Short Term. * CRAB Considers CC (Hypo) as Long Term Loan because of its revolving nature.

Date of Rating: 19 July 2012

Corporate

Particulars

Validity: The Entity and Long Term ratings are valid up to 30 June 2013 and the Short Term rating is valid up to
limit expiry date of respective credit facilities or 30 June 2013 whichever is earlier.
Rating Based on: Audited financial statements up to 31 December 2011, bank liability position as on June 30 2012
and other relevant quantitative as well as qualitative information up to the date of rating declaration.
Methodology: CRABs Corporate Rating Methodology (www.crab.com.bd)
Analysts:
Mohammed Amin

RATIONALE

amin@crab.com.bd

Credit Rating Agency of Bangladesh Limited (CRAB) has

retained AA1 (Pronounced Double A One) rating in the

Khandakar Shahed Royhan

Long Term of M.M. Ispahani Limited (hereafter referred

shahed@crabrating.com

to as MMIL or the Company) and AA1 (Lr) rating of BDT

359.17 million Long term loan outstanding (LTO) &
BDT 75.00 million Cash Credit (Hypo) limit. CRAB has
also assigned ST-1 rating to BDT 1805.0 million
aggregate fund based limit.
CRAB has performed the present rating assignment
based on audited financial statements as on 31
December 2011 and other relevant information.
M.M. Ispahani Limited is a concern of Ispahani Group.
The group gained reputation in tea manufacturing &
textile for its industrial skill, long experience and good

both in local & foreign market signals growth of such

industry.
Major Changes in Surveillance

Sales growth 33%

Tea dept (53%), PHTM (45%) of total turnover

Financial Expense 13% Increased

New banks included (Pubali Bank & Brac Bank,

Habib Bank ltd)

Overall Debt position expanded ( Short term

loan 76% increased)

Debt position 1.0 (0.8 Last Year)

Operating exp increase 40%

Department
wise
Capacity

utilization

increased (2%-3%)

CRAB I CRAB Ratings on Corporate Credit Digest I 24 July 2012

Market share unchanged

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CRAB Rating Report

distribution channel. New entry in the industry has

increased competition but the incremental demand

M.M.Ispahani Limited

M.M. Ispahani Limited has been maintaining a diversified portfolio of revenue generating sources since its
initiation. In the surveillance period it is observed that the Tea department contributed 53% (last year 55%) & PTWM
contributed 45% (last year 43%) of the total consolidated turnover. The share of the M.M. Ispahani Limited in tea
industry is developing significantly. In last financial year, the company gained highest local market share (33%) and
export market share was 17%. It is reported that the market share is almost unchanged in the surveillance period.
In the current period, the company generated sales revenue amounting BDT 8,417 million, registering 33% growth
than that of previous year. In the current period the capacity utilization of Tea department increased to 92% (last
year 90%). COGS as percentage of sales (ranged from 81.8% to 85.5% during FY06 to FY11) remains stable although
price hike of raw materials in textile industry was reported. The 40% increase of Operational expenses in 2011
impacted the overall earning factors viz EBIT & EBITDA negatively. As a result EBIT reduced -10% amounting BDT
253.87 million which was BDT 282.33 million in 2010.
Quality control is a key concern of tea processing industry and rating of MMIL also takes into account the
availability of such facility and its maintenance level. The tea department has a quality control lab with most
modern testing tool & technology. Most sophisticated machinery & equipments are used to ensure the quality of
tea. The entity has both the manual & automated quality checking and control system. PTHM has also a testing lab
where serial checking is done from pre operation to post operation of production. Raw cotton, and other related
materials are used in production process prior to check the quality. Modern technology and experienced lab
assistant of M.M. Ispahani Limited provide competitive advantage ensuring the quality of product.
The present rating has been conducted on the basis of audited financial statements. In the reported financial years
(2009-2011) the position of Current & Quick ratio remained satisfactory. The position of fund flow slightly reduced
due to lower net income amounting BDT 151.55 million (BDT 185.47 million in 2010).
The rating also considered the incremental borrowed fund. The Debt to Equity Ratio of M.M. Ispahani Limited
slightly increased from 0.8 (x) to 1.0 (x) in FY11. The increasing business operation pusses the overall fund
necessity significantly. Accordingly the entity increased its debt position adding two new banks in the surveillance
period. Hence the entity requires utilization its entire production capacity to a satisfactory level to avoid adverse
financial complexities in future. The year to year Equity inclusion is providing support to MMIL while the fund
necessity is in increasing trend to achieve the optimum production capacity.
Loan rating of M.M. Ispahani Limited reflects on credit history and repayment behavior with financiers. HSBC, SCB
and UCB are the main bankers of the Company. It has said to have satisfactory repayment record as reported by the
financiers.

www.crab.com.bd; www.crabrating.com

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M.M.Ispahani Limited

CRAB RATING SCALES AND DEFINITIONS Long Term (Corporate)

Long Term Rating
AAA
Triple A
AA1, AA2, AA3*
Double A

A1, A2, A3
Single A

Definition
Companies rated in this category have extremely strong capacity to meet financial
commitments. These companies are judged to be of the highest quality, with minimal
credit risk.
Companies rated in this category have very strong capacity to meet financial
commitments. These companies are judged to be of very high quality, subject to very low
credit risk.
Companies rated in this category have strong capacity to meet financial commitments,
but are susceptible to the adverse effects of changes in circumstances and economic
conditions. These companies are judged to be of high quality, subject to low credit risk.
Companies rated in this category have adequate capacity to meet financial commitments

BBB1, BBB2, BBB3

but more susceptible to adverse economic conditions or changing circumstances. These

Triple B

companies are subject to moderate credit risk. Such companies possess certain
speculative characteristics.
Companies rated in this category

have

inadequate capacity

to

meet financial

BB1, BB2, BB3

commitments. Have major ongoing uncertainties and exposure to adverse business,

Double B

financial, or economic conditions. These companies have speculative elements, subject to

substantial credit risk.

B1, B2, B3

Companies rated in this category have weak capacity to meet financial commitments.

Single B

These companies have speculative elements, subject to high credit risk.

CCC1, CCC2, CCC3

Triple C
CC
Double C

Companies rated in this category have very weak capacity to meet financial obligations.
These companies have very weak standing and are subject to very high credit risk.
Companies rated in this category have extremely weak capacity to meet financial
obligations. These companies are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
Companies rated in this category are highly vulnerable to non-payment, have payment

C
Single C

arrearages allowed by the terms of the documents, or subject of bankruptcy petition, but
have not experienced a payment default. Payments may have been suspended in
accordance with the instrument's terms. These companies are typically in default, with
little prospect for recovery of principal or interest.

D
(Default)

D rating will also be used upon the filing of a bankruptcy petition or similar action if
payments on an obligation are jeopardized.

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC.
The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.

LONG-TERM RATING: LOANS/FACILITIES FROM BANKS/FIS

(All loans/facilities with original maturity exceeding one year)

CRAB I CRAB Ratings on Corporate Credit Digest I 24 July 2012

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M.M.Ispahani Limited

RATINGS

DEFINITION

AAA (Lr)

Loans/facilities rated AAA (Lr) are judged to offer the highest degree of safety, with regard to timely

(Triple A)
Highest Safety

payment of financial obligations. Any adverse changes in circumstances are unlikely to affect the
payments on the loan facility.

AA (Lr)*
(Double A)
High Safety
A (Lr)
Adequate Safety
BBB (Lr)
(Triple B)
Moderate Safety
BB (Lr)
(Double B)
Inadequate Safety
B (Lr)

Loans/facilities rated AA (Lr) are judged to offer a high degree of safety, with regard to timely payment
of financial obligations. They differ only marginally in safety from AAA (Lr) rated facilities.
Loan/facilities rated A (Lr) are judged to offer an adequate degree of safety, with regard to timely
payment of financial obligations. However, changes in circumstances can adversely affect such issues
more than those in the higher rating categories.
Loans/facilities rated BBB (Lr) are judged to offer moderate safety, with regard to timely payment of
financial obligations for the present; however, changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for issues in higher rating categories.
Loans/facilities rated BB (Lr) are judged to carry inadequate safety, with regard to timely payment of
financial obligations; they are less likely to default in the immediate future than instruments in lower
rating categories, but an adverse change in circumstances could lead to inadequate capacity to make
payment on financial obligations.
Loans/facilities rated B (Lr) are judged to have high risk of default; while currently financial obligations

High Risk

are met, adverse business or economic conditions would lead to lack of ability or willingness to pay
interest or principal.

CCC (Lr)

Loans/facilities rated CCC (Lr) are judged to have factors present that make them very highly vulnerable

Very High Risk

CC (Lr)
Extremely High Risk

C (Lr)
Near to Default

to default; timely payment of financial obligations is possible only if favorable circumstances continue.
Loans/facilities rated CC (Lr) are judged to be extremely vulnerable to default; timely payment of
financial obligations is possible only through external support.
Loans/facilities rated C (Lr) are currently highly vulnerable to non-payment, having obligations with
payment arrearages allowed by the terms of the documents, or obligations that are subject of a
bankruptcy petition or similar action but have not experienced a payment default. C is typically in
default, with little prospect for recovery of principal or interest. C (Lr) are typically in default, with little
prospect for recovery of principal or interest.

D (Lr)
Default

Loans/facilities rated D (Lr) are in default or are expected to default on scheduled payment dates.

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC.
The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.

www.crab.com.bd; www.crabrating.com

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M.M.Ispahani Limited

SHORT-TERM CREDIT RATING: LOANS/FACILITIES OF BANKS/FIS

(All loans/facilities with original maturity within one year)
DEFINITION
ST-1
Highest Grade
ST-2
High Grade
ST-3
Adequate Grade
ST-4
Marginal
ST-5

This rating indicates that the degree of safety regarding timely payment on the loans/facilities is very
strong.
This rating indicates that the degree of safety regarding timely payment on the loans/facilities is strong;
however, the relative degree of safety is lower than that for issues rated higher.
This rating indicates that the degree of safety regarding timely payment on the loans/facilities is
adequate; however, the issues are more vulnerable to the adverse effects of changing circumstances than
issues rated in the two higher categories.
This rating indicates that the degree of safety regarding timely payment on the loans/facilities is
marginal; and the issues are quite vulnerable to the adverse effects of changing circumstances.
This rating indicates that the degree of safety regarding timely payment on the loans/facilities is

Inadequate Grade

minimal, and it is likely to be adversely affected by short-term adversity or less favorable conditions.

ST-6
Lowest Grade

This rating indicates that the loans/facilities are expected to be in default on maturity or is in default.

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CRAB I CRAB Ratings on Corporate Credit Digest I 24 July 2012

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