Press Release

VIS Maintains Entity Ratings of Akram Cotton Mills Limited

Karachi, June 17, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Akram Cotton Mills Limited (ACML) at ‘BBB/A-2’ (Triple B/A-Two). Outlook on the ratings is ‘Stable’. Long Term Rating of BBB reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short term rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on June 29, 2021.
ACML is a spinning mill specialized in the production of carded and combed cotton yarns for hosiery purposes. The Company generates almost 100% sales through local customers. Registered office of the Company is in Lahore while manufacturing unit is located in Pattoki, Punjab.
Assigned ratings take note of growth in topline on account of surge in demand for yarn in local market during FY21 and the ongoing fiscal year. In line with market trend in the spinning sector, ACML’s margins also improved on the back of inventory gains. Management expects margins to remain higher -till end-FY22 primarily on account of favorable inventory buying. Ratings also account for BMR leading to product upgradation and operational efficiencies. The Company has added combed yarn to its product line, contribution of which is expected to improve margins, going forward. However, ratings remain sensitive to vulnerability of the sector to commodity price fluctuations.
Assessment of financial profile indicates improvement in profitability profile backed by higher turnover and margins. Liquidity metrics depict improvement, however, we expect some pressure to build up on account of increase in commodity prices and inflationary pressures. Capitalization indicators continue to remain on the higher side at HFY22 due to higher capital working requirements & debt draw down for machinery payments. Sustainability of margins and revenue growth along with improvement in capitalization indicators and maintenance of liquidity profile will remain important for ratings, going forward.
For further information on this rating announcement, please contact Ms. Sara (Ext: 207) at (021) 35311861-66 or email at

Sara Ahmed

Applicable Rating Criteria: Corporates (April 2021)

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