Press Release

VIS Assigns Initial Ratings to Ejaz Spinning Mills Limited

Karachi, June 27, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Ejaz Spinning Mills Limited (ESML). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings is ‘Stable’.

ESML is a part of Ejaz Group which was established in 1950 in order to pursue commodities trading business. Currently, the group has two textile spinning mills and a real estate venture by the name of Lake City Holdings (Pvt.) Ltd. ESML is engaged in manufacturing and sale of yarn through its two spinning units, having 55,000 spindles of Japanese origin. Shareholding is mainly held by the sponsoring family, with Mr. Gohar Ejaz, Chairman/CEO, being the largest shareholder. Capacity utilization levels have remained high over the years except for pandemic outbreak FY20. No major capacity enhancement or BMR were carried out in the past three years. The company plans to add 16,000 spindles over the next two years with an estimated capex of Rs. 1b which is planned to be funded mainly through internal capital generation.

Net sales increased considerably during FY21 and HY22 on the back of higher volumes and improved average selling price of yarn. Majority of sales were made to local value-added textile units. Gross margins improved as the impact of higher cotton price was offset by favorable yarn price during the period. Liquidity profile is supported by adequate internal cash flows generation and small working capital cycle. The company’s adequate coverages are also partially a function of a conservative capital structure. As the management plans to mobilize no further long-term borrowings over the rating horizon, leverage indicators are expected to remain low, going forward. The ratings would remain sensitive to maintenance of liquidity and capitalization indicators at comfortable levels.

For further information on this rating announcement, please contact Mr. Maimoon Rasheed at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk


Sara Ahmed
Director


VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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