Press Release
VIS Reaffirms Entity Rating of Sunrays Textile Mills Limited
Karachi, December 26, 2025: VIS Credit Rating Company Limited (VIS) reaffirms the entity ratings of Indus Lyallpur Limited at ‘A-/A1’ (Single A Minus/A One). Long-term entity rating of ‘A-’ reflects good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A1’ reflects strong likelihood of timely repayment of short-term obligations with excellent short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 25, 2024.
Sunrays Textile Mills Limited (‘SUTM’ or ‘the Company’) incorporated in 1987 under the repealed Companies Ordinance, 1984 (now Companies Act, 2017) is a public limited company listed on the Pakistan Stock Exchange. The Company is engaged in manufacture, trade and sale of yarn. The registered office and manufacturing facilities are in Karachi and Muzaffargarh, respectively.
The business risk profile of the upstream textile spinning sector remains elevated in FY25–1QFY26, largely due to sustained pressure on margins. High energy tariffs (~12.3 cents/kWh versus ~6.3 cents/kWh in regional markets) continue to undermine cost competitiveness, while the 18% sales tax on imported inputs has tightened liquidity through higher working-capital lockups. Export performance also remained weak, with basic cotton yarn exports contracting by 28.8% to USD 680.7m in FY25. In addition, the shift from FTR to the NTR regime and the applicability of Super Tax have increased the effective tax burden to ~29%. Although monetary easing offers some relief, sector prospects remain dependent on energy cost rationalization and efficiency improvements.
The assigned ratings consider stable revenues in FY25 and 1QFY26 despite a subdued outlook for the textile spinning sector. Profitability remained modest, with gross and operating margins remaining broadly stable year-on-year, though softening in 1QFY26 due to operational cost pressures. Capital structure remained moderately leveraged, with a slight increase in borrowings to fund working capital requirements, while the equity base strengthened on account of profit retention. Liquidity indicators remained adequate, with a stable current ratio; however, higher inventory levels and elevated receivables lengthened the operating cycle. Debt coverage metrics, though manageable in FY25, weakened to 1QFY26 on account of negative FFO. Going forward, a rebound in profitability indicators, improvement in gearing levels, along with sustained stability in liquidity metrics, will remain critical to underpin the assigned ratings.
For further information on this ratings announcement, please contact 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf