Press Release

VIS Reaffirms Entity Ratings of Rajby Industries

Karachi, June 03, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Rajby Industries (RI). Outlook on the assigned ratings is ‘Negative’. Long Term Rating of ‘A-’ signifies good credit quality and adequate protection factors. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good and risk factors are small. The previous rating action was announced on April 24, 2020.

Assigned ratings take into account RI’s moderate business risk profile and reputed clientele. The rating incorporates business risk arising from volatility in cotton yarn prices, which affects the sector gross margins. During FY20, the industry has undergone a slowdown, as global consumer spending on garments was affected by pandemic-induced lockdowns globally.

During FY20, the onset of the pandemic in Q4’FY20, resulted in halted shipments and order cancellations, resulting a decrease in utilization levels. Topline of the company displayed a CAGR of 16% from FY15-FY19, however, FY20 sales witnessed a drop of 5% and further contraction in topline is expected for the ongoing year. Given the quantum of debt, maintaining a positive bottom line would be a challenging task, requiring optimization of cash conversion cycle.
The Company’s gross margin has come under stress during the period under review, falling below the peer median. Resultantly, FFO depicted contraction and was negative during H1’FY21. As a result cash flow coverage indicators and FFO to Debt have been affected and stand below the threshold for the assigned rating, capitalization metrics also warrant improvement.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk .



Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates - April 2019
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright June 03, 2021 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.