Press Release

VIS Reaffirms Entity Ratings of Lucky Knits (Private) Limited

Karachi, April 18, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Lucky Knits (Private) Limited (LKPL) at ‘A-/A1’ (Single A Minus/A One). Medium to long-term entity rating of ‘A-’ signifies good credit quality. Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A1’ indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on November 17, 2023.

LKPL, established in 2004, operates as a partially vertically integrated manufacturer headquartered in Karachi. The Company specializes in the production of knitted apparel, including T-shirts, polo shirts, hoodies and various other garments. LKPL’s manufacturing facilities include knitting, embroidery and stitching enabling it to maintain a diversified product range. Primarily export-oriented, the Company exports its products across two continents: United States (US) and Europe.

Pakistan’s textile sector faces significant challenges, driven by economic cyclicality, intense competition and structural issues. The sector is highly sensitive to demand fluctuations, making it vulnerable to broader economic conditions. In FY24, cotton production rose by 79%, but a sharp 59.4% decline was recorded by October 2024. While a rebound to 5.55 million bales is expected in FY25, challenges like limited cotton acreage, rising energy costs and adverse weather conditions persist. Despite these issues, 1QFY25 textile exports grew, driven by reliance on imported cotton and value-added products. However, profitability remains vulnerable to cotton & yarn price fluctuations, inflation and exchange rate volatility. Additional pressures include a 23% gas price hike for captive power plants in March 2025 and the shift to the Normal Tax Regime (NTR), both of which will increase costs and strain manufacturers’ financial performance.

The assigned ratings draw comfort from a strong sponsor profile (Yunus Brother Group) which has a diversified presence across multiple sectors. Furthermore, sponsor support remains unchanged through an associate, Lucky Energy (Private) Limited and a director, in the form of unsecured, non-interest-bearing loans repayable in 25 years.

The assigned ratings incorporate the significant financial challenges LKPL faced in FY24, primarily due to the loss of a major client, resulting in a decline in sales and weakening capital structure. The Company experienced liquidity and profitability pressures, necessitating reliance on short-term borrowings to support operational requirements. However, revised payment terms with customers and suppliers, coupled with the acquisition of new clients, has positioned LKPL for future growth. While ongoing discussions with the former client offer potential for recovery, management expects a return to profitability in FY26, driven by new business acquisitions and operational efficiencies. Despite ongoing liquidity constraints, the Company anticipates an improvement in profitability, which is expected to enhance its financial stability.

For further information on this ratings announcement, please contact 021-35311861-64 or email at info@vis.com.pk.




Applicable Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .