Press Release

VIS places Entity Ratings of Khalid Shafique Spinning Mills Limited on ‘Rating Watch - Negative’ Status

Karachi, April 14, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Khalid Shafique Spinning Mills Limited (KSSML) at ‘BBB/A-2’ (Triple B/A-Two). The medium to long-term rating of ‘BBB’ denotes adequate credit quality with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. The previous rating action was announced on February 18, 2019.
KSSML is a small-sized spinning unit, with majority owned and managed by the sponsoring family. The ratings assigned take into account a steady increase in topline supported by volumetric increase in sales along with higher yarn prices. Overall liquidity indicators have remained adequate. The ratings also factor in sound coverages amid sustained level of cash flows, despite elevated finance cost. Leverage indicators have remained low; though some increase has been witnessed by end-1HFY20 due to debt procurement for working capital needs. However, the ratings are constrained by relatively small equity base, nearly full capacity utilization, vulnerability of spinning sector to raw material prices and any adverse changes in regulatory duties.

With the advent of corona virus pandemic, the demand outlook for textile products in general including yarn for both local and international consumption looks weak. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating-Watch’ status. With the demand compression emerging from ongoing global crisis and continued lockdown situation, which will virtually impact the entire textile value chain, ratings are being placed on ‘Negative’ outlook. The ratings are dependent upon maintenance of sales, profit margin, debt service coverage, and gearing ratios at an adequate level, with outlook subject to be reviewed once the situation stabilizes.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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 .