Press Release

VIS Reaffirms Entity Ratings of Sheikhupura Textile Mills Limited

Karachi, July 30, 2026: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sheikhupura Textile Mills Limited (‘SHTML’ or ‘the Company’) at ‘BBB+/A2’ (Triple B Plus/A Two). The 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. The short-term rating of ‘A2’ denotes good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors Outlook on the assigned rating remains ‘Stable’. Previous rating action was announced on July 21, 2025.

SHTML, historically a spinning and value-added embroidery unit has continued its evolution towards being a manufacturing to retail operation through its well-established brand, Cross Stitch and newly launched lines, Kiji Retail, and Home Warmth, with retail segment sales reaching almost two-third in 9MFY26 from just above half in FY24. Ratings take into account adequate operational performance, with satisfactory utilization levels across both weaving and embroidery units, and increasing contribution from retail operations to the revenue base.

Topline increased during FY25, supported by growth in retail and spinning sales, while gross margins improved on account of higher retail contribution which generates far superior margins in comparison with spinning. However, profitability remained constrained amid rising operating expenses, primarily due to elevated salaries and retail-related overheads. Capitalization and coverage metrics weakened owing to increased borrowings and higher working capital requirements, particularly due to inventory buildup for retail operations. While the shift towards retail provides margin support, reliance on short-term borrowings to finance seasonal inventory exposes the Company to potential cash flow pressures.

Going forward, the ratings will hinge on sustained revenue growth, improved profitability, effective inventory management, and prudent execution of planned capex under the retail expansion strategy.

For further information on this ratings announcement, please contact at 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

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 July 30, 2026 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.