Press Release
VIS Maintains Entity Ratings of Bhimra Textile Mills (Pvt.) Limited
Karachi, December 15, 2023: VIS Credit Rating Company Limited maintains entity ratings of Bhimra Textile Mills (Pvt.) Limited (‘BTML’ or ‘the Company’) to 'BBB/A-2' ('Triple B'/'A-Two'). Medium to long term rating of 'BBB' indicates Adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Previous Rating action was announced on December 29, 2022.
Bhimra Textile Mills (Private) Limited was incorporated as a private limited company in 2004. The principal activity of the Company is manufacturing and sale of yarn. The registered office of the Company is located at 12-C-IIm M.M. Alam Road, Gulberg III, Lahore. The manufacturing facility is located at 37-KM Sheikhupura Road, Mouza Manawala, District Sheikhupura.
Assigned ratings for BTML incorporate a constrained business risk profile attributed to the spinning sector's susceptibility to economic cyclicality and heightened competition. The spinning sector in Pakistan, comprising of over 400 mills, faces challenges from various economic and environmental factors, including crop damage by flooding and inflation in FY23. Prospects of cotton production in ongoing season are favorable as compared to last cotton season but still below expectations. However, the sector's performance is closely tied to broader economic conditions, rendering it vulnerable to demand fluctuations.
Assigned ratings also incorporate the financial risk profile of BTML. In FY23, the spinning sector faced challenges arising from economic and environmental circumstances, leading to reduced yarn production and constrained profitability. Despite a decrease in total revenue, BTML managed to improve gross margins in FY23, driven by timely raw material acquisition. However, 1QFY24 saw a slight decline in gross margins due to sustained inflationary pressure. The finance burden constrained net margins during FY23 and 1QFY24, primarily from higher debt utilization amid increased policy rates. The capitalization profile reported a deterioration with higher short-term debt utilization, leading to increased gearing and leverage ratios. Meanwhile, the liquidity profile remained stable, however, the debt service coverage experienced significant stress in FY23 albeit recovering in 1QFY24 to adequate levels.
Going forward, ratings will remain sensitive to management's capacity to realize projected plans. Moreover, improvement of key financial metrics to be commensurate with assigned ratings will remain an important consideration for future ratings.
For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at info@vis.com.pk.
Sara Ahmed
Director
Applicable Rating Criteria:
Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf