Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Al-Razzaq Fibres (Private) Limited
 

Karachi, June 21, 2022: VIS Credit Rating Company Limited has assigned initial entity ratings to Al-Razzaq Fibres (Private) Limited at ‘A-/A-2’ (Single A Minus/A-Two). Long Term Rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies 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’.

Incorporated in 2013 as a private limited concern, Al-Razzaq Fibres (Private) Limited is involved in the manufacturing of griege fabric for both the local and export market. The Company has also launched its own retail brand in 2017 under the name “Saya”. Registered office of the Company is situated in P.E.C.H.S. Karachi, while plant and warehouses are located in Nooriabad, and Korangi Industrial Area, Karachi.

Assigned ratings underpin Company’s focus on increasing backward integration with the establishment of a spinning unit, currently underway, as well as capacity addition initiatives undertaken to cater to increasing demand while generating operational efficiencies in due course. Ratings take into account healthy growth in sales on account of volumetric sales growth which continues in the ongoing year. Sales mix is focused on primarily local fabric sales, although management has plans to increase exports going forward. Gross margins, however, depict a declining trend on a timeline basis. First half of FY22 reflects some improvement, nevertheless, management expects margins to streamline at existing levels by year end.

Ratings also take into account sound capitalization indicators and adequate liquidity profile of the Company. Debt profile encapsulates mainly related party borrowings with minimal dependence on short term borrowings for working capital management, leading to low gearing levels. However, going forward, while management envisages internal cash flows to be sufficient to meet the capex requirements, we expect that over the rating horizon, there may be some pressure on gearing. Moreover, with the spinning capacity coming online, working capital requirements are likely to increase, which may impact the liquidity of the Company. Improvement in margins along with realization of projected profitability and maintenance of capitalization indicators will remain important for ratings, going forward.

For further information on this rating announcement, please contact the undersigned at 021-35311861-66 or email at info@vis.com.pk.






Sara Ahmed
Director

Applicable Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited