Press Release

VIS Maintains Entity Rating of Crescent Bahuman Limited

Karachi, June 24, 2024: VIS Credit Rating Company Limited (VIS) maintains entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) for Crescent Bahuman Limited. 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 May 09, 2023.

Crescent Bahuman Limited (“CBL” or "the Company"), functions as a vertically integrated entity, encompassing spinning, dyeing, weaving, washing, stitching, and finishing units within its operational facilities. CBL commenced its operations on June 17, 1995, with production sites and a sales office situated on Sargoda Road, Pindi Bhattian, while its headquarters is positioned at Zafar Ali Road, Gulberg-V, Lahore.

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 growth rate of 15.5% in FY23 with all-time high gross margin of 17.7% in the same period backed by increase in effective prices due to rupee depreciation. Major portion (95%) of the Company’s sales are generated through exports. Client concentration remains on the higher side with more than 75% of net sales generated from a single client. Company’s net profit margin was also reported higher than its peer median in FY23.

Change in the Company’s rating outlook accounts for the Company's financial risk profile, wherein equity has registered a notable growth amid profit retention. Simultaneously, CBL has also reduced its total debt resulted in a decreased gearing ratio. As of 1H’FY24, the Company’s gearing has shown further improvement attributed to repayment of loans. The Company has exhibited improvement in its coverage indicators, with an increase noted in Funds From Operations (FFO) to total debt and FFO to long-term debt indicators during FY23 and HY’FY24. Additionally, there has been enhancement in its Debt Service Coverage Ratio (“DSCR”) as of Dec’23. Moving forward, it is important for the Company to sustain the growth in operational, profitability and capitalization indicators from the perspective of ratings review.

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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .