Press Release

VIS maintains Entity Ratings of Din Textile Mills Limited

Karachi, May 04, 2021: VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of ‘BBB+/A-2’ (Triple B plus /Single A-Two) assigned to Din Textile Mills Limited (DTML). Outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Positive’. Long term rating of ‘BBB+’ signifies adequate credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 27, 2020.

Assigned ratings draw comfort from strong sponsor profile. Din Textile Mills Limited (DTML) belongs to the Din group which has diversified presence in textiles, leather, farm products and real estate development. The group has been operating in the textile sector for over three decades. Principal activity of DTML includes production of yarn to primarily cater to the requirements of the local market. DTML’s production units are located in Punjab.

Revision in rating outlook reflects forward integration initiative of the company in the weaving segment to diversify revenues and enhance operational efficiency along with improvement noted in profitability and liquidity indicators post second wave of COVID. Impact of expansion in the financials of the company is yet to be seen. Ratings are however constrained on the back of elevated gearing and leverage indicators. Ratings remain dependent on projected improvement in leverage profile along with fixed assets investments translation into commensurate earnings and margins.

Assigned ratings also take into account moderate business risk profile supported by recovery in industry wise exports post ease in COVID-19 lockdown measures. With the objective of enhancing exports to support the economy, the Government of Pakistan (GoP), has provided incentives in the form of subsidized utility tariffs, low interest rates (ERF, LTFF and TERF) and sales tax refund to the textile industry. Even though impact of Covid-19’s third wave remains elevated, VIS expects the order book for the industry to remain strong in the ongoing year, easing our business risk concerns.

Ratings incorporate topline growth during FY20, despite lockdown imposed due to COVID-19 and projected improvement in the same over the medium term on account of adequate orders in the pipeline along with sales emanating from the weaving segment. Overall profitability profile of the company was impacted by higher cotton prices, currency devaluation, inconsistent utility costs and higher finance costs during FY20. During 9MFY21, gross margins of the company improved due to higher sales and inventory gains; the same are projected to witness slight improvement going forward on the back of forward integration in the value added segment. Liquidity profile of the company is considered adequate with satisfactory cash flow coverage of outstanding obligations. Liquidity indicators are expected to improve in line with projected increase in overall profitability, post expansion. Assigned ratings incorporate upward trend in leverage indicators on account of debt drawdown to finance expansion in the weaving segment. Given plans to further drawdown debt to finance BMR in the spinning segment, capitalization indicators are expected to increase, however, post FY22 the same shall improve in line with higher projected profit retention and debt repayment.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 201) at (021) 35311861-66 or email at .

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited