Press Release

VIS Assigns Initial Entity Ratings of Shafi Lifestyle (Pvt.) Ltd

Karachi, August 26, 2020: VIS Credit Rating Company Limited (VIS) has assigned initial rating of ‘BBB+/A-2’ (Triple B Plus/Single A-Two) to Shafi Lifestyle (Pvt.) Ltd. The long term rating signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small. Outlook on the assigned rating is ‘Stable’.

SLPL is a growing player in Pakistan’s footwear export market with an estimated market share of around 8.5% in the country’s footwear export. The assigned ratings incorporate SLPL’s adequate business risk profile, improving market position and financial profile on the back of continuous capacity additions and focus on value addition. Ratings also take into account Company’s low leveraged capital structure and improving cash flows. However, working capital requirements are extensive and have currently been funded through related party funding support. Going forward, leverage indicators are expected to increase but are expected to remain within manageable levels. Ratings also draw comfort from SLPL’s association with Shafi Group of Companies which has a diversified business risk profile and extensive experience in the leather sector.

Pakistan’s footwear export volumes after a period of consistent decline have recovered in FY18 and FY19. Footwear export volumes continued growth trajectory till 8MFY20 but were impacted in the last 4 months due to Covid-19. Despite the decline in footwear export volumes, footwear exports increased in dollar terms due to higher average selling prices. SLPL’s sales increase has significantly outpaced industry growth with revenues growing at a Compound Annual Growth Rate (CAGR) of 46.5% from FY16-FY20. Growth in sales has been driven by continued capacity expansion and focus on high margin footwear products. Capacity utilization has consistently been maintained on the higher side. Volumetric growth in sales and increasing margins has resulted in improvement in profitability profile. Going forward, increase in profitability will be a function of volumetric growth over the rating horizon. Ratings remain dependent on continuing growth momentum and strengthening capitalization while undertaking planned expansion. Maintaining low leveraged capital structure, conservative financial policy and sound cash flow coverages are considered important from a rating perspective. Any lengthy weakening in operating environment that may result in pressure on profitability profile and modest existing capitalization levels may result in pressure on ratings.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 306) at (021) 35311861-66 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (April 2019)

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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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