Press Release
VIS Maintains Entity Rating of Rajby Industries
Karachi, July 15, 2024: VIS Credit Rating Company Limited (VIS) maintains entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) for Rajby Industries. Long-term entity rating of ‘A-’ reflects good credit quality, and adequate protection factors. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ indicates good certainty of timely payment, with sound liquidity factors. Access to capital market is good and risk factors are small. Outlook on the assigned ratings is revised from ‘Stable’ to ‘Positive’. Previous rating action was announced on June 22, 2023.
Rajby Industries ("RI" or "the Company"), part of the Rajby Group, focuses on manufacturing and exporting a variety of garments such as trousers, shorts, skirts, dungarees, jackets, jeggings, and vests. The company's registered office is situated at Plot # 38-39, Sector 27, Korangi Industrial Area, Karachi.
Assigned ratings incorporate the medium business risk profile of the textile sector in Pakistan, marked by exposure to economic cyclicality and intense competition. The sector's performance is notably influenced by broader economic conditions, rendering it susceptible to demand fluctuations driven by economic factors. Furthermore, as a substantial contributor to total exports, the textile industry faces exposure to global economic cyclicality, geopolitical challenges, and liquidity constraints due to lengthy process of sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.
Assigned ratings take into account the Company’s business updates, whereby the Company’s sales achieved a marginal growth in FY23 with higher gross margin backed by increase in effective prices and strategic focus of the Company on selected customers and geographical segments. Entire revenue of the Company’s is generated through exports. Company’s net profit margin was also reported higher than its peer average FY23.
Change in the Company’s rating outlook also accounts for the Company's financial risk profile, wherein equity has registered a notable growth amid profit retention. Simultaneously, RI has also reduced its total debt resulting in a decreased gearing ratio. As of 9M’FY24, the Company’s gearing has shown further improvement attributed to repayment of long-term loans and zero short-term borrowings at end 9M’FY24. The Company has exhibited improvement in its debt coverage indicators, with an increase noted in Funds From Operations (FFO) to total debt and FFO to long-term debt indicators during FY23 and an in the ongoing year. Additionally, there has been enhancement in its Debt Service Coverage Ratio (“DSCR”) as of Mar’24. Moving forward, it is important for the Company to sustain its profitability and capitalization indicators.
For further information on this ratings announcement, please contact at 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