Press Release
VIS Reaffirms Entity Ratings of Arshad Corporation (Pvt.) Limited
Karachi, May 09, 2025: VIS Credit Rating Company Limited has reaffirmed entity ratings of Arshad Corporation (Pvt.) Limited (‘ACL’) at 'A-/A2' (Single A Minus/A Two). Medium to long term 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 ‘A2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on March 06, 2024.
Incorporated in 1973 as a private limited company in Punjab, Pakistan, ACL operates under a registered office in Lahore. The Company is primarily engaged in the manufacturing and sale of fabric and made-up textiles, with production facilities located in Shahkot and two sites in Khurrianwala.
Pakistan’s textile sector faces persistent challenges driven by economic cyclicality, intense competition and structural constraints. The industry remains highly sensitive to demand fluctuations, exposing it to broader economic pressures. In FY24, cotton production rose by 79% due to a low base, but it declined by 59.4% YoY by October 2024. While a rebound to 5.55 million bales is projected for FY25, it remains uncertain amid limited cultivation area, rising energy costs and climate-related risks such as floods and pest infestations. Despite these issues, 3QFY25 textile exports grew, led by value-added segments and reliance on imported cotton. However, profitability remains vulnerable to raw material price volatility, inflation and exchange rate movements. Additional cost pressures stem from a 23% gas price hike from March 2025 and the transition to the Normal Tax Regime, both of which are expected to strain margins further.
The reaffirmed ratings reflect the Company’s strengthened capitalization profile, underpinned by sustained equity growth through internal cash generation and continued sponsor support. While gearing and leverage ratios remain elevated, they continue to be within similar ranges. Revenue growth primarily from increased local sales, supported improved profitability. However, profitability was constrained in FY24 due to higher finance costs, with partial recovery noted in 1HFY25 amid easing interest rates. Liquidity and debt coverage indicators remained adequate. Nonetheless, rising stock-in-trade, receivables, payables and short-term borrowings during the review period indicated increased working capital intensity. Resultantly, effective cash flow management will be important going forward. The ratings will remain sensitive to the Company’s ability to further strengthen its capitalization and maintain adequate liquidity.
For further information on this ratings announcement, please contact at 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