Press Release

VIS Maintains Entity Ratings of Al-Karam Towel Industries (Private) Limited

Karachi, April 20, 2021: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Al-Karam Towel Industries (Private) Limited (AKTI) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is changed to ‘Stable’ from ‘Rating Watch-Developing’. Previous rating action was announced on April 23, 2020.

Ratings draw comfort from the company’s strong market position (~8.9% market share in the towel exports), and recovery in volumes during FY21 upon increase in export demand amid improving post-COVID economic environment. The company experienced loss in volumes during FY20 due to the pandemic, which was partly supported by rupee devaluation. Going forward, profitability is expected to increase on the back of rising international demand. Assigned ratings also incorporate capacity expansion projects to further reduce dependence of yarn procurement, ensure operational efficiencies, and timely servicing to clients. The CAPEX is financed through concessionary rates offered by Long Term Financing Facility (LTFF) and Temporary Economic Refinance Facility (TERF).

Although client concentration remains with the U.S.A, with top ten clients constituting more than three-fifths of the sales, Al-Karam Towels diversified its product portfolio during FY20 into new regions including U.A.E., Europe, and Asia.

The profitability indicators continue to depict improvement on a timeline basis resulting in healthier cash flow generation, thus providing comfort to the liquidity profile and debt servicing ability. Cash flow coverage indicators exhibited pressure during FY20 on the back of increasing debt servicing due to capacity expansion projects; however the same remains within satisfactory levels. Inventory levels have witnessed increase during FY20 on the back of higher safety stocks and cotton procurement for the spinning unit. However, management believes the same to revert to normal levels over the rating horizon. Leverage and gearing indicators continue to trend upwards given capacity expansion projects. Ratings remain dependent on maintaining leverage indicators within prudent levels.

For further information on this rating announcement, please contact Ms. Sara Ahmed (Ext: 207) or the undersigned at (021) 35311861-66 or email at info@vis.com.pk






Faryal Ahmed Faheem
Deputy CEO


Applicable Criteria: Industrial Corporates (May 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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