Press Release
VIS Reaffirms Entity Ratings of Zephyr Textiles Limited
Karachi, January 5, 2026: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Zephyr Textiles Limited at ‘BBB+/A2’ (Triple B Plus /A Two). Medium to long term rating of ‘BBB+’ indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A2' good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on December 11, 2025.
Zephyr Textiles Limited (‘ZTL’ or ‘the Company’) is a publicly listed company that operates a greige fabric and towel weaving unit, a towel dyeing and processing unit and is also involved in garment processing. The Company’s headquarters are located in Lahore with the weaving unit and power plant situated in Bhai Pheru and the towel unit located in the Kasur District.
Assigned ratings reflect higher business risk encountered by textile exporters emanating from declining domestic cotton production, reliance on costly imports and persistent high energy costs, all having adverse impact on profit margins across the sector. Furthermore, government policies have introduced additional pressures on demand of locally produced yarn. Moreover, global tariffs could further raise supply chain and cost-side challenges for textile companies in Pakistan.
ZTL is optimizing its portfolio by phasing out low-margin fabric production to prioritize value-added exports. This pivot stabilized net sales during FY25, as export momentum effectively offset weakened domestic demand, shifting the sales mix toward lucrative international markets. Despite these efforts, gross margins declined slightly in FY25, prompting the Company to expand its solar power capacity and divest underutilized looms to mitigate rising direct costs. Net profit also decreased in FY25, pressured by lower gross margins, reduced other income, and high finance costs. Liquidity remains a concern, as the current ratio dipped while the net operating cycle extended. Furthermore, although short-term borrowing drove an increase in gearing and leverage in FY25, the debt service coverage ratio (DSCR) showed recovery.
In 1QFY26, financial metrics indicated mild improvements, supported by cost savings from solar energy and reduced finance costs following debt repayments. The successful divestment of non-core land assets with advance payments, provide a liquidity infusion to optimize the cash cycle for debt repayment and reinvestment, potentially augmenting the Company's capital structure and cash flow. Going forward, the successful execution of vertical integration and the expansion of the solar power footprint and improvements in financial metrics will remain crucial from ratings perspective.
For further information on this ratings announcement, please contact on 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