Press Release

VIS Reaffirms Entity Ratings of Zaman Textile Mills (Private) Limited

Karachi, March 12, 2025: VIS Credit Rating Company Limited (‘VIS’) reaffirms Entity Ratings of Zaman Textile Mills (Private) Limited (‘ZTML’ or ‘the Company’) at 'A-/A2' (‘Single A minus’/’A Two’). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous Rating action was announced on March 14, 2024.

ZTML was incorporated in Pakistan in 1969 as a public company limited by shares and changed its status to a private company in 2016. Principal activity of ZTML is manufacturing, processing, dyeing, sale and trading of yarn and dyed fabrics. The registered office of the Company is situated in Karachi. The facilities for production of yarn are located at Kotri Industrial Area near Hyderabad while fabric and dyeing facilities are located in Karachi.

Assigned ratings take into account the business risk profile of the textile sector in Pakistan, characterized by high to medium risk. The assessment reflects factors including fluctuations in raw material availability, energy supply challenges, competitive pressures, and regulatory changes. The significant increase in local cotton production during the period under review resulted in reduced reliance on imports, supporting raw material procurement for the industry. However, the sector faced operational challenges due to an increase in energy costs. Competitive pressures from regional markets, currency depreciation, elevated interest rates, and inflation also impacted the sector. Regulatory developments, including the withdrawal of the Regionally Competitive Energy Tariffs (RCET) regime and zero-rating for export-oriented sectors, introduced uncertainties. The ratings derive comfort from demonstrated financial support extended by the sponsors to meet working capital requirements.

Assigned ratings also take into account the financial risk profile of the Company. Revenue growth was driven by increase in production following commissioning of a new spinning unit, supporting higher sales. Despite revenue increase, gross margins declined due to elevated energy costs and termination of regionally competitive energy pricing regime. Profitability remained under pressure, though a partial recovery was observed in subsequent periods as conditions in both local and export markets improved, enabling the Company to pass on a portion of the increased cost burden to the customers. The long-term debt portfolio, including LTFF and TERF facilities, continued to provide a cost advantage, mitigating the impact of an elevated interest rate environment. Capitalization metrics indicated improvement, supported by profit retention, timely debt repayments, and cautious utilization of short-term debt. Liquidity remained adequate while coverage indicators experienced some weakening due to higher finance costs but have demonstrated a recovery as local interest rates declined.

Going forward, the ratings will remain sensitive to the Company's ability to sustain improvement in profitability, manage energy cost challenges as well as maintain adequate capitalization and liquidity metrics. Continued sponsor support and any changes in regulatory policies impacting the textile sector will also remain important factors for the assigned ratings.

For further information on this rating 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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .