Press Release
VIS Reaffirms Entity Ratings of Kamal Limited
Karachi, February 27, 2020: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Kamal Limited (KL) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 31, 2018.
KL is a composite unit engaged in the textile business comprising spinning, weaving, dyeing, bleaching, printing, stitching, garments, home textile & retailing. The shareholding of the company is mainly vested with the sponsoring family which is actively involved in the day to day affairs of the company. The company also has its footprint in the local market through a brand called “SO Kamal” for the sales of ready to wear clothes, fabric & bed linen.
The ratings assigned to KL take into account its moderate financial risk profile emanating from strong coverages amid relatively high leverage indicators. The sales increased on account of higher exports and better prices during FY19 while gross margin decreased slightly mainly on account of higher depreciation charge owing to installation of new spinning unit and additional looms. The net equity increased during the year on account of profit retention and remained adequate. Despite higher equity base, leverage indicators remained high on account of procurement of both long and short-term debt during FY19. Cash flows improved on the back of profitability though its impact on coverages remained muted due to increase in borrowings. The company has proposed capex for new spindles and looms which is planned to be financed through a mix of long term debt and internal cash flows. The management anticipates gearing to remain around similar levels with repayment of existing borrowings along with expected improvement in equity on the back of profit retention. The ratings would remain sensitive to maintenance of gearing and coverages at an adequate level.
For further information on this rating announcement, please contact the undersigned at (021) 35311861-66 or Mr. Maimoon Rasheed at (042) 35723411-13 or mailto:info@vis.com.pk
Javed Callea
Advisor
Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx