Press Release

VIS Assigns Preliminary Rating to Proposed Short Term Sukuk of Al Karam Textile Mills (Private) Limited

Karachi, August 27, 2024: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of ‘A-1’ to Al Karam Textile Mills (Private) Limited (‘AKTM’ or ‘the Company’) proposed Short Term Sukuk (‘STS’ or ‘the Instrument’). Short term rating of A-1 reflects strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Entity ratings of AKTM stands at ‘A/A-2’ (Single A/ A-Two). Outlook on the assigned entity rating of AKTM is ‘Stable’.

AKTM is a vertically integrated textile setup with operational history of nearly four decades. Product portfolio includes a variety of yarns ranging from coarse to fine counts, fabric, home textiles, institutional textiles and garments. AKTM also has a retail arm namely Alkaram Studio, which was founded in 2010 and has since become a prominent local brand, with 62 retail outlets spread nationwide.

AKTM plans to issue a short-term, secured, privately placed Sukuk amounting to Rs. 4b inclusive of a Green Shoe Option of Rs. 1.0b. The issue will be utilized by AKTM to meet working capital requirements of its newly established Nooriabad spinning plant. The instrument will have a tenor of up to six months starting from the issue date and profit will be payable at the time of redemption of ST Sukuk on the outstanding principal amount. Profit payment will be at a rate of 6M Kibor rate + 1%.

Assigned rating reflects the proposed security structure of the instrument providing a 40% liquid asset coverage. In addition, Debt Payment Account (DPA) is also being maintained. Assessment of financial position of the Company reflects revenue growth attributed to recovery in demand and increased proportion of local sales in FY24. Gross margins remained intact during the period under review. While net margins were under pressure, however, the same is expected to rebound amid expected decline in interest rates. Liquidity and cashflow indicators remained intact with adequate debt service coverage.

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

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 August 27, 2024 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.