Press Release

VIS Reaffirms Entity Ratings of Arshad Corporation (Pvt.) Limited

Karachi, March 6, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Arshad Corporation Limited (‘ACPL’ or ‘the Company’) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 29, 2022.

Arshad Corporation (Private) Limited is incorporated in Punjab, Pakistan as a private limited company since January 12, 1973. The registered office of the Company is situated on the 16th floor, Tricon Corporate Centre Main Jail Road, Gulberg 2, Lahore. The Company is principally engaged in the business of manufacturing and selling fabric and made-up. The Company's manufacturing facilities are in Shahkot and two additional sites in Khurrianwala.

"Assigned ratings incorporate elevated business risk in the textile sector, stemming from a weak macroeconomic environment, high-interest rates, inflationary pressures, escalating raw material costs, ongoing energy crisis, and a global demand slump. Despite the industry's historical significance, these factors pose challenges to margin sustainability and future growth.

Assigned ratings also take into account the financial risk profile of the Company. The profitability profile depicts relative stability despite economic challenges. The export-oriented nature of the business supported the top line and margins. The capitalization profile witnessed improvement through equity expansion, contributing to some improvement in gearing and leverage ratios, albeit still remaining elevated. Debt service coverage remained adequate despite weakening on account of higher financial burden. The liquidity profile also remains adequate through support from sufficient internal cash generation during FY23.

While adequate, weakening of the coverage profile in 1HFY24 has resulted in pressure on ratings, compounded by elevated leverage profile. Going forward, ratings will remain sensitive to the Company’s ability to improve its coverage and capitalization profile to be commensurate with assigned ratings. Moreover, further enhancement of the liquidity profile and maintenance of profitability metrics will also remain important considerations for future reviews.

For further information on this ratings 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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .