Press Release

JCR-VIS Reaffirms Entity Ratings to Rajby Textiles (Private) Limited

Karachi, December 26, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Rajby Textiles (Private) Limited (RTPL) at ‘A-/A-1’ (Single A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 29, 2017.

Reaffirmation of ratings takes into account improvement in various financial and operational performance metrics. Despite significant growth in installed capacity, capacity utilization remained on the higher side in FY18 and has increased further in the ongoing fiscal year. Moreover, debt servicing ability has continued to improve with growth in cash flows. Ratings also incorporate company’s moderate business risk profile and extensive experience of the Rajby group in the denim manufacturing business.

After enhancing capacity in the denim fabric segment, management now plans to vertically integrate group operations through setting up a spinning unit. The same will be set up in two phases and will be financed through a mix of debt and equity. Post completion of expansion in the fabric segment, sales revenue reported a jump of 67% during FY18. Given increased marketing efforts and focus towards enhancing exports, proportion of exports sales has increased to around two-fifth of total sales. With higher capacity utilization in the ongoing year and increase in selling prices given rupee depreciation, management projects sales revenue for FY19 to post double digit growth. Profitability witnessed growth in FY18 primarily on account of volumetric growth in sales and was supported by rebate on exports, drawback of local taxes and levies and higher foreign currency income.

Liquidity profile of the company is adequate with sufficient cash flows in relation to outstanding obligations and strong debt servicing ability. Improvement in working capital cycle from related party and timely receipt of receivables from GoP will augment liquidity profile. Capitalization indicators have largely been maintained on a timeline basis but leverage indicators are expected to remain elevated over the medium term given proposed expansion plan of setting up the spinning division. Going forward, ratings will remain dependent on improving leverage indicators while maintaining sound debt servicing ability given the planned expansion of setting up a spinning unit.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

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JCR-VIS Credit Rating Company Limited