Press Release

VIS Assigns Initial Entity Ratings to Al-Karam Textile Mills (Pvt) Limited

Karachi, March 28, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A/A-2’ (Single A /A Two) to Al-Karam Textile Mills (Private) Limited (AKTMPL). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘A’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small.

Incorporated in 1986 as a private limited company, AKTMPL is principally engaged in manufacturing and sale of textile products. It is a vertically integrated company with diverse product portfolio including a variety of yarns ranging from coarse to fine counts, home textiles, institutional textiles and garments.

The assigned ratings take into account extensive experience of sponsors, established business profile and improving profitability of the company. Topline of the company has increased at a Compound Annual Growth Rate (CAGR) of 5% in the period from FY16-FY18. As per the management, the increase in net sales was function of increase in average selling price and growth in volumes. Around three fourth of the company’s sales are geared towards the export market and primarily constitute sales of home textiles to renowned international companies. Furthermore, presence in the local market through established ‘Al Karam Studio’ provides comfort to the business risk profile. Focus on international sales has led to client concentration in sales; however, the same is partly mitigated due to long term association with the clients. Economies of scale as a result of volumetric growth have translated to improvement in profitability on timeline basis. Sustainability in business risk profile and improvement in margins and profitability in the given rating horizon are important rating determinants going forward.

Liquidity profile of the company is considered adequate in view of satisfactory cash flows in relation to outstanding obligations. Equity base of the company has depicted an increasing trend owing to profit retention. However, gearing and leverage indicators depict room for further improvement. The assigned ratings take into account the order-in-hand positions and its beneficial impact on leverage and gearing indicators of the company. Current ratio has varied overtime; however the same has remained consistently above 1.0x. The company has acquired sizeable short term debt to satisfy its rising inventory needs. However, stock in trade and trade debts provide adequate coverage for short term borrowings. Going forward, maintenance of leverage indictors in line with projections is considered important from ratings perspective.

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

Javed Callea
Applicable Rating Criteria: Industrial Corporates (May 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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