Press Release

VIS Reaffirms Entity Ratings of Z.A. Corporation (Pvt.) Limited

Karachi, April 28, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Z.A. Corporation (Pvt.) Limited (“ZAC” or “the Company”) at 'BBB+/A2' (Triple B plus/A Two). Medium to long term rating of 'BBB+' indicates Adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A2' indicates a good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. The outlook on the assigned ratings remains “Stable”. Previous Rating action was announced on May 08, 2024.

ZAC is a medium-sized spinning unit located in Faisalabad. Shareholding of the Company is vested with Sheikh Danish Ali. The principal activity of the Company is the production and sale of yarn.

Assigned ratings incorporate the business risk profile of Pakistan’s textile spinning sector, which remains influenced by demand cyclicality, competitive pressures, regulatory challenges, and energy sensitivity. The sector serves as a critical upstream segment in the textile value chain, with performance closely linked to broader economic conditions. Cotton production remained below domestic demand requirements despite a marginal improvement in cultivation area, as shifting preferences among farmers toward higher margin crops limited recovery. Export volumes saw limited growth, with changes in global procurement patterns and political uncertainty contributing to the diversion of export orders to regional competitors. However, the impact on the Company’s sales remained contained due to product focus on coarse yarn, which continued to find demand. The withdrawal of the Export Facilitation Scheme and transition from the Final Tax Regime to the Normal Tax Regime have reduced cost competitiveness of locally produced yarn. Regional competition continues to pose structural challenges, with limited product diversification constraining market capture. Energy tariffs and regulatory changes have added to operating cost pressures, while high energy costs and rising wages have further compressed margins.

Assigned ratings also consider the financial risk profile of the Company. Profitability metrics showed contraction in margins, primarily owing to rising input and energy costs, with limited ability to transfer these increases to buyers due to competitive pressures. Resultantly, while revenue remained stable the gross margin continued to decline. Net margins were supported by a conservative capital structure, which reduced exposure to financial costs. Capitalization indicators improved due to timely repayments and profit retention, with no addition of new debt. Liquidity remained supported by improved working capital management, resulting in elevated current ratios. Coverage metrics showed a decline in debt service capacity during the review period, though remained aligned with the assigned ratings.

Going forward, ratings will remain sensitive to the sector’s cost structure, energy pricing, regulatory developments, and changes in global demand dynamics. Improved profitability under competitive pressure, continued improvement in capitalization metrics, and maintenance of liquidity and coverage ratios will be important for the assigned ratings.

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





Applicable Rating Criteria:
Industrial 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 .