Press Release
VIS Reaffirms Entity Ratings of Bhimra Textile Mills (Pvt) Ltd
Karachi, February 19, 2026: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Bhimra Textile Mills (Pvt) Ltd (‘BTML’ or ‘the Company’) at BBB+/A2 (Triple BBB Plus/ 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 rating remains Stable. Previous ratings action was announced on February 18, 2025.
BTML was incorporated in 2004 as a private limited company. As a family-owned business, the Company is engaged in the manufacture and sale of yarn locally, with its production facility located in Sheikhupura, while the registered office is in Lahore.
By early 2026, Pakistan’s spinning sector has experienced structural contraction, with over 100 units ceasing operations over the past five years amid competitive, structural, and cost-related pressures. Policy changes, including the transition from the Final Tax Regime to the Normal Tax Regime and the imposition of 18% sales tax, have resulted in liquidity constraints due to extended refund cycles, increasing reliance on working capital financing. Elevated energy tariffs relative to regional peers, reduced domestic cotton production (approximately 5.0 million bales), and continued dependence on imports have further pressured cost structures. Additionally, competition from low-priced Chinese yarn imports, coupled with inefficient energy configurations and aging machinery, has intensified margin pressures across the sector.
The assigned ratings reflect the Company’s established operational profile, supported by a manufacturing setup that enables efficient fulfilment of varying yarn count orders and a stable cash based revenue. Despite elevated production costs, profitability recovered in FY25, supported by lower finance costs and effective tax management. However, 1HFY26 margins remained thin and continue to reflect pressure from elevated input costs and competitive pricing dynamics, constraining overall profitability. Management expects margin support in 2HFY26 from cotton procured at competitive prices. Additionally, the ongoing installation of a 2.175 MW solar power system (expected by March 2026) is projected to yield annual net cash savings of ~PKR 63 million.
Liquidity pressures persisted in FY25 due to elevated working capital requirements and an elongated operating cycle, necessitating continued reliance on short-term borrowings, despite a largely cash based sales mix (~90% of revenue). Consequently, the Company’s capital structure remained leveraged, while debt coverage metrics continued to draw support from the prevailing low interest rate environment. Coverage indicators exhibited weakening during 1HFY26 due to low cashflow generation, resulting in a coverage gap; however, management expects the shortfall to recover in 2HFY26 in line with anticipated improvement in cashflows.
Going forward, the ratings remain sensitive to the Company’s ability to contain working capital pressures and improve its cash conversion cycle, while sustaining debt coverage metrics, particularly considering the interim weakening recorded in 1HFY26. Liquidity pressures are expected to persist through FY26, accordingly, continued strain on debt servicing may exert negative pressure on the ratings. Management has also indicated plans to expand the solar power system by an additional 2.5 MW in 2027.
For further information on this ratings announcement, please contact on 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