2015

M/S MAA Textile

Assigned Rating:

Date of Rating: 28 January 2016

Validity: 27January 2017

Summary:
CRAB has assigned CRAB SE-3 rating to M/S MAA
Textile. This rating reflects adequate credit
worthiness and overall performance of the unit
regarding its business, operation, financial and
management structures and functioning
According to CRAB SME Rating comparative
analysis M/S MAA Textile exceeds the average
performance of the SME Universe of CRAB as
regards its commitment to lenders.
Profile:
M/S MAA Textile (hereinafter referred as MT or
The Firm) is a proprietorship concern owned by
Mr. Md. Gani Mia. Currently M/S MAA Textile is
involved in manufacturing and exporting of
towels. The Firm started operation in 2000.

Analysts:
Muntasir Mamun Chowdhury
muntasir@crab.com.bd
Md.Mavin Ahmed
mavin@crab.com.bd
10P Spider Model

Methodology:
CRAB was appointed by the management of M/S
MAA Textile to assess its current credit worthiness
and workings. CRAB conducts its analysis from a
position of independence and objectivity. The
rating is based on public and non-public
information provided by M/S MAA Textile as well
as on one-to-one interviews with management
and banker. The SME Rating is pursued with
reference to CRAB SME Rating standards (here
after,
the
Standard).
The
Standard
is
established according to a methodology based on
internationally accepted SME rating standards,
developed and continuously updated with market
feedback from stakeholders. The Standard places
CRAB in a unique position to assess the credit
worthiness of SME unit and ensures that the
services conducted by CRAB are closely tied to
market expectations. The Rating & Rating Report
is based on current information provided to CRAB
until 26 January 2016. The Rating & Rating Report
may be changed, suspended or withdrawn as a
result of changes in or unavailability of such
information.
The CRAB SME Rating methodology is available at
www.crabrating.com

KEY RATING DRIVERS

Comfort

Proprietor and his son is directly involved with the business and they conduct the whole
administrative activities which enable them to establish direct contact with client making
favorable impact in getting new business.
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M/S MAA Textile

Credit Rating Report

M/S MAA Textile

Factory premise is extended from two storied to four storied for increasing production
capacity which will enable them to achieve bigger order.

The son of the proprietor is a textile engineer who is getting involved with the business. His
association will help to increase technical efficiency.

Challenges

Procuring in cash and delivery finished goods in credit stress the working capital condition
but it is due to nature of bhusiness.

Use of old machines leads to the increased cost of maintenance but the firm has planned to
install new machines

Building up and maintain proper compliance is a major challenge for the firm since
compliance is an important issue for export oriented business.

BACKGROUND
M/S MAA Textile, a proprietorship concern was established in 2000 by Mr. Md. Gani Mia. Before
starting export M/S MAA Textile used to deemed export of towel. The textile mill is located at BISIC,
Shibpur, Narshingdi where both of the factory and administrative office are situated. Currently the
Firm has 42 shuttle looms. The business is in the process of expanding by incorporating power
looms to the business. It procures the main raw material yarn from different suppliers and sells
finished fabric.
Business Model of M/S MAA Textile

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M/S MAA Textile

1. OPERATION & BUSINESS RISK PROFILE

The whole production process is run from a self owned building of 9000 sft.
M/S MAA Textile runs its operations from three storied building located at Shibpur. The whole
building has a total of 9000 sft space for production, warehouse and for administrative office. The
factory is established in the ground floor and first floor is used for finishing the production process
such as sewing the border of towels and checking the finished products. Administrative office and
warehouse are also situated in the second floor.
The towel manufacturer achieves order through both local and international buying
houses.
The firm is engaged in manufacture of different kinds of towel only. The color and quality varies
depending on client requirement but mostly the firm manufactures towel of 10 count, 16 count and
20 count. The business process starts from getting order through buying house. M/S MAA Textile
has diversified base of buying house which includes buying houses from home and abroad.
Table1- List of buying houses
Local
AKM Towel
Novel Bangla
Decent Fabric

International
Koiki Trading
Shutex Company Limited
Indigo International

Selling price varies depending on quality and color.

The firm runs its operation with 42 shuttle looms which has production capacity of 1 lac Lbs per
month. Current capacity utilization is 80 thousand Lbs per month. But production capacity and
utilization varies with product quality since the number of pieces of towels in one kilogram of
product varies from ten to twenty depending on quality. Price also varies depending on product
quality and color of the towel. But MT does not have dyeing facilities. The firm conducts dyeing
from Panama Composite, Tharmex, Navid Dyeing by issuing back to back LC. Dyeing cost for white
color is only BDT 25 per kilogram where as dyeing cost is BDT 110 for other color per kilogram.
Table 2- Average Price Variation
Count
Price/US
Quality (10
(White, 10

D Per

pc/KG)
10*10
16*16
20*20

Piece
4.57
6.58
7.59

count, White)

Price/ USD

Color (10

Price/ USD

Per Piece

Count, 10

Per Piece

2.29
3.01
4.57

pc/KG)
White
Pink
Yellow & Blue

4.57
5.19
5.60

20 pc/KG- 10c
16 pc/KG- 10c
10 pc/KG- 10c

MT procures yarn mainly from Haque traders and Ananda Yarn in cash basis. However, the Firm
receives payment from client only after delivering products which stress the working capital.
The firm has work in hand from three countries.
Currently the firm has three orders in hand valuing USD 1.94 lac which will be completed within
February, 2016. MT has one order from Koike Trading Corporation Ltd., Japan, one order from
Shatex MFG. Corporation, Canada and one order from Poland. The firm achieves the orders through
local agent of the buying houses

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M/S MAA Textile

Chart 1: Future Work in Hand

Mt has to incur both formal and informal cost for generating order.
Key challenge for the firm is to achieve order from clients. But clients approach to to MT through
buying house. Then buying house pass the orders to different garments. For generating orders
buying houses charges a certain amount of fees. Besides MR has to incur informal order generation
cost which is in practice for this kind of business. However, challenge arises for MT since the firm is
new and it does not have standard procedure for dealing with this sought of business dealing which
includes both formal and informal cost. As a result relationship can hamper which will ultimately
affect the business directly.
Marinating business by the proprietor and his son reduces administrative expense.
The proprietor Mr. Md. Gani Mia is the main person for generating order and running the business.
His son who is also a textile engineer is associated with the technical support of the firm. But his
son is also helps his father in maintain formal communication with the buyer which will help the
future successor to understand the business cycle in better manner. Apart from these two persons,
there is no other person in the management level which reduces their administrative expense.
Building up and maintain proper compliance is a major challenge for the firm.
The firm has started direct export in recent time. Mt did not use to keep audited financial
statement, proper safety measurement and other compliance which may hamper getting future
order from reputed buyer. Though the proprietor is an experienced businessman in his field, he
does not have much expertee in ensuring compliance. At the same time bringing the company in
proper structure will increase cost which will reduce the profitability.
MT has three major risk arises from business process.
Due to nature of business, it takes almost six months from accepting the order till getting payment.
Meanwhile master LC is issued in the name of MT and then MT starts manufacturing the order.
Then the firm conducts dyeing and printing from third party. When the finished product is ready
and delivered to client, client issue payment against master LC which is subject to acceptance of
the finished product. Three major risk arises from business procedure of MT. Firstly, MT receives
payment form around five months after the acceptance of offer. By this time yarn price may
fluctuate in either way which may positively or negatively affect the profit margin. Secondly,
conducting dyeing & printing from third party may reduce the product quality which may result in
rejection of whole order. In this case whole master LC will be cancel. But Mt has insurance facility of
only BDT1.55 corer which gives protection against fire, lightning and riot. Finally, procuring yarn in
cash and receive payment at end of production cycle stress the working capital.
2. FINANCIAL RISK PROFILE
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M/S MAA Textile

Sales growth in 2016 is subject to successful achivement of upcoming order.

In 2016 the firm is expected to generate BDT 93.1 million sales compared to BDT 60.0 million in
2015. MT has started direct export in 2016 and now the firm is expanding the capacity of
production. In 2016 sales growth is expected to be around 50% because of starting direct export.
COGS was stable around 85% in last year and it may rise a little in 2016 depending on yarn price
fluctuation.
Profitability condition seems to be moderately good.
The Firm made net profit of BDT 6.4 million in 2015 having 10.6% net profit margin. Moreover, the
Firm is expected to generate net profit of BDT 9.7 million in coming year since the firm has around
USD 2.0 lac work in hand which will be completed with February, 2016. The firm is negotiating on 8
more LCs from Japan and Poland. MT had gross profit margin and operating profit margin of 13.1%
in 2015.
Stressed working condition is a major concern for the firm.
Inventory turnover ratio and inventory processing period was 8.8x and 166 days in 2015. But the
Firm procures yarn in cash whereas receives LC payment after completing whole order which
usually take five to six months. This creates stress working capital condition for the firm.
The funded and non-funded combined loan limit is BDT 24.5 million
The Firm is availing BDT 10.0 million back to back LC limit for conducting sizing, dyeing and
printing. MT also has BDT 12.5 million cash credit loan limit for procuring raw material meeting day
to expense requirement. Besides MT has also BDT 2 million SME term loan for expanding factory
premise.
Current coverage position is subject to new back to back LC performance in 2016
MT had EBIT to interest expense ratio of 11.6x in 2015 showing moderately strong coverage
position but this margin will shrink in 2016 since the loan facilities has increased in 2016 However,
the bank finds the relationship with client satisfactory with most of the payments in due time.
Besides MT has a sales to loan ratio of 6.32 in 2015 and the proprietor has net worth of BDT 74.60
million.

3. SUMMARY
CRAB finds that the major operational and business risks arise from process, planning, technology
and compliance. Lack of proper financial statement, order generating strategy, use of old machines
are the major concern area of M/S MAA Textile. However, long experience of the owner in textile
mill business, long term relationship with suppliers, availability of local labor force and ability to
understand business cycle and using present capacity in efficient manner and satisfactory bank
repayment behavior give comfort to the business.
Appendix - 1: FACT SHEET
Background

Name of the Firm

Year of Commencement
Business Address
Initial Investment
Legal status
Legal history

M/S MAA Textile

2000
BISIC, Shibpur, Narshingdi
BDT 25 million
Proprietorship
Founded b in 2000 by the proprietor

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M/S MAA Textile

Number of employees

~90

Key Person Profile

Proprietors Name
Age
Qualification
Designation/responsibilities
Previous experience
Equity

Mr. Md. Abdul Gani Mia

45
SSC
Proprietor
15 years
BDT 74.60 million

Sales Office & Warehouse

Business Addresses

Address
Telephone No
Occupied Area

BISIC, Shibpur, Narshingdi

01979750322
9000 sft, 4 storied building

Land-use Right

Own

Operation
Nature of Business & Product type
End-user industries
Major suppliers
Major Buyers
Degree of Competition
Payment Methods
Sale Method
Public Opinion
Succession planning
Direct Involvement of Successor
Decision-making powers
Reporting system
Any Backward/forward linkage

Manufacturing Towel
Export
Yarn supplier, Dyeing & Printing Mills
Local and international buying houses
Fragmented nature of industry exerts high degree of competition
Cash and Back to back LC.
LC
Good
Son (Textile Engineer)
High
Proprietor
Informal
No

Banking facilities:

Name of the Banker

Loan Repayment Behavior
History of Reschedule
Purpose of Bank loan
Name of the Insurer
Sum Insured

SBAC Bank Limited

Satisfactory
No
Working Capital purpose, Procurement of raw material,
Expansion of factory premise.
Islami Commercial Company Insurance Limited
BDT 15.95 million

Source: The Proprietor, Bank and based on some relevant documents

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M/S MAA Textile

Appendix - 2: Details of Credit Facilities of M/S MAA Textile.

Details of Credit Facilities of M/S MAA Textile. as on 21 January 2016 (Amount in BDT Million)
Loan
Type
Long Term
Short
Term
Short
Term

Limi

Outstand

ing

SME Term Loan

2.0

1.8

1-Nov-2021

SBAC Bank Limited

CC (Hypo)

12.5

9.79

28-Feb-2016

SBAC Bank Limited

Back to back LC

10.0

Total

24.0

11.59

Nature

Bank

Facility

Funded

SBAC Bank Limited

Funded
NonFunded

Limit
Expiry

11-Nov2016*

*Yet to disburse.

Appendix 3: Loan utilization of M/S MAA Textile (Mil. BDT)

Period
Jan15- Jan16

Debit Sum
59.1

Credit Sum
49.31

CC Limit
12.5

Debit sum to limit

4.73x

Credit sum to limit

3.94x

Appendix-4: Key Financial Indicator of M/S MAA Textile

Financial Highlights
Year Ended December 31
(Mil. BDT)

E2016

2015

Net Sales

93.1
55.2%

60.0
25.0%

86.9%
31.8

86.0%
24.3

Sales Growth (%)

CoGS as % of Sales
Net Profit
Financial Expense

9.7

6.4

Gross Profit Margin

13.1%

14.0%

Operating Profit Margin

11.8%

12.3%

Net Profit Margin

10.4%

10.6%

13.1

11.6

EBIT to Interest expense ()

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M/S MAA Textile

SME Rating Scale

Rating

Rating definition

CRAB SE1/ME 1

The highest credit-quality rating assigned by CRAB to an SME

CRAB SE2/ME 2

The high credit-quality rating assigned by CRAB to an SME

CRAB SE3/ME 3

The adequate credit-quality rating assigned by CRAB to an

CRAB SE4/ME 4

SME
The moderate credit-quality rating assigned by CRAB to an

CRAB SE5/ME 5

SME
The inadequate credit-quality rating assigned by CRAB to an

CRAB SE6/ME 6

SME
The risk prone credit-quality rating assigned by CRAB to an

CRAB SE7/ME 7

SME
The poor credit-quality rating assigned by CRAB to an SME

CRAB SE8/ME 8

The lowest credit-quality rating assigned by CRAB to an SME

DISCLAIMER
Copyright 2016, CREDIT RATING AGENCY OF BANGLADESH LIMITED ("CRAB"). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH
INFORMATION

MAY

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COPIED

OR

OTHERWISE

REPRODUCED,

REPACKAGED,

FURTHER

TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE

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CRAB ICRAB Ratings on SME Credit Digest I 04 February, 2016