Press Release
VIS Maintains Ratings of Bhimra Textile Mills (Pvt.) Limited with ‘Rating Watch - Negative’ Status
Karachi, April 27, 2020: VIS Credit Rating Company Limited (VIS), while maintaining entity rating of ‘BBB-’/A-2’ (Triple B Minus/A-Two) assigned to Bhimra Textile Mills (Pvt.) Limited (BTML), has placed the same on ‘Rating Watch - Negative’ status. The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable & sufficient 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. The previous rating action was announced on March 26, 2019.
BTML is a small size spinning mill which generates 100% sales through local customers. Shareholding is mainly vested with the sponsoring family which is actively involved in the day to day affairs of the company. The group also manages a well-known café in Lahore. BTML added compact devices on remaining spinning frames during Nov-Dec 2019 that increased production capacity of the company. BTML manufactures cotton carded compact yarn from imported and locally procured cotton with counts ranging from 12/S to 30/S for multiple uses. Capacity utilization remained relatively higher during FY19.
With the advent of global Coronavirus disease (COVID-19) pandemic, the demand outlook for textile products in general and especially value-added looks weak. Given BTML is highly dependent on local sales for cash flows generation and servicing of its financial obligations, status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating-Watch’ status. With the demand compression emerging from ongoing global economic crisis and continued lockdown situation coupled relatively high financial risk profile vis-à-vis peer companies, ratings are being placed on ‘Negative’ outlook. The ratings are dependent upon maintenance of profit margin, debt service coverage, and gearing ratios at an adequate level. Further, net equity including sponsor & related party loans need to be maintained. Any reduction in sponsor and/or related party loans would be considered as a credit negative event.
For further information on this rating announcement, please contact the undersigned at (021) 35311861-66 or email at info@vis.com.pk
Faryal Faheem Ahmed
Deputy CEO
Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx