Press Release
VIS Upgrades Entity Ratings of Bhimra Textile Mills (Pvt) Ltd
Karachi, February 18, 2024: VIS Credit Rating Company Limited (‘VIS’) has upgraded the entity ratings of Bhimra Textile Mills Pvt Ltd (‘BTMPL’)’ or ‘the Company’) to BBB+/A2 (Triple BBB plus/ Single A Two) from ‘BBB/A2’ (Triple BBB / Single 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 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains Stable. Previous ratings action was announced on December 15, 2023.
Bhimra Textile Mills (Private) Limited (‘BTML’ or ‘the Company’) 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, while the manufacturing facilities are located at Sheikhupura Road, Mouza Manawala, District Sheikhupura.
Assigned ratings consider the medium to high business risk profile of the textile sector in Pakistan, characterized by challenging local and global economic and geopolitical conditions and intense global competition due to its export-oriented nature. The sector is susceptible to demand fluctuations driven by broader economic factors and faces liquidity constraints from government delays in sales tax refunds. Supply-side risks include impacts from local cotton crop production and reliance on imported raw materials, exposing the sector to exchange rate risk and import restrictions. Despite these challenges, textile companies have maintained operational efficiency and supply chain control, managing risks in a volatile environment.
Ratings upgrade considers stability and marginal improvement in financial risk metrics, despite prevailing challenges. The profitability profile reflects a stable gross margin despite energy cost pressures. The Company's operating margin improved with controlled operating expenses, though net margins were constrained by higher finance costs driven by high interest rates and unfavorable taxation adjustments. The capitalization profile improved as reliance on short-term debt reduced, supported by internal cash generation and sponsor loans classified as equity. Liquidity strengthened with improved short-term debt coverage and current ratio, while the coverage profile remained adequate, despite challenges.
Going forward, the assigned ratings will remain sensitive to stabilization in net profitability, contingent on easing policy rates and international cotton prices. The sustainability of the improved capitalization and liquidity profile will be important for maintaining the ratings.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf