Press Release
VIS Reaffirms Entity Ratings of Akhtar Textile Industries (Private) Limited
Karachi, May 09, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Akhtar Textile Industries (Private) Limited (ATIL) at ‘A/A-2’ (Single A/ A-Two). The long-term rating of ‘A’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Outlook on the assigned ratings are “Stable’. Previous rating action was announced on June 21, 2021.
The assigned ratings takes into account positive momentum in exports of value-added segment of the textile industry on account of growing export demand led by shift of regional business and export-oriented policies of the government amid pandemic. Prospects of the industry are strong going forward, however rising cotton prices with delayed pass on remains a key business risk. Furthermore, ratings draw comfort from the continuous increase in production capacities of the Company to cater increasing demand which are expected to support profitability and yield operational efficiencies going forward.
Assessment of financial risk profile in FY21 incorporates topline growth on account of both price and volume increase. However, gross margins declined during the outgoing year owing to adverse input/output price movements and inflationary pressures. Operating margins were sustained in FY21, while net margins recorded improvement due to lower finance costs and uptick in ancillary income witnessed on account of dividend received upon liquidation of Novelty Enterprises. Consequently, cash flow coverage indicators remained satisfactory during the outgoing year, while debt servicing levels remained sound. Liquidity profile of the Company is adequate largely supported by a relatively lower cash conversion cycle.
However, liquidity indicators are anticipated to exhibit pressure going forward on account of higher working capital requirements due to inflation and capacity expansion projects. Capitalization indicators depicted slight improvement in FY21 with increased profitability despite surge in the overall quantum of total debt. Projected profitability is anticipated to keep capitalization levels within manageable levels. Ratings remain dependent upon maintaining topline growth, capitalization indicators along with improvement in margins.
For further information on this rating announcement, please contact Ms. Nisha Ahuja (Ext: 204) or the undersigned (Ext. 207) at 021-35311861-70 or email at info@vis.com.pk.
Sara Ahmed
Director
Applicable Rating Criteria: Industrial Corporates - August 2021
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf