Press Release

VIS Maintains Entity Ratings of Khalid Shafique Spinning Mills Limited

Karachi, June 11, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Khalid Shafique Spinning Mills Limited (KSSML) at ‘BBB/A-2’ (Triple B/A-Two). The medium to long-term rating of ‘BBB’ denotes adequate credit quality with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Previous ratings action was announced on April 14, 2020.

KSSML is a spinning unit, majority owned and managed by the sponsoring family. The ratings assigned take into account increase in revenue and profitability during 9MFY21 underpinned by higher volumetric sales and favorable yarn prices. Overall liquidity indicators have remained adequate. The ratings also factor in improvement in debt coverage ratios supported by higher cash flows generation during 9MFY21. Gearing stood slightly lower as the impact of mobilization of long-term debt was more than offset by the decrease in short-term borrowings; while debt leverage ratio remained largely stagnant owing to increase in trade payables by end-9MFY21. The company has embarked upon balance, modernization, and replacement (BMR) of its spinning unit and will be funded majorly through the Temporary Economic Relief Facility (TERF) scheme of the State Bank of Pakistan. The repayment capacity is expected to remain adequate as the grace period of 18 months will allow the company to retire most of its exiting long-term debt by the time first installment of TERF becomes due. The ratings are constrained by scale of spinning operations as the BMR will only replace the old spindles, relatively small equity base, nearly full capacity utilization, and vulnerability of spinning sector to raw material prices and any adverse changes in regulatory duties.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk








Javed Callea
Advisor

VIS Entity Rating Criteria Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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