Press Release

VIS Maintains Instrument and Entity Ratings of Sadaqat Limited

Karachi, June 22, 2022: VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of ‘A/A-2’ (Single A /A-Two) to Sadaqat Limited (SL). Moreover, VIS also maintains the rating of debt instrument (TFC) at ‘A’ (Single A). Medium to Long Term rating of ‘A’ signifies good credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short Term entity rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Outlook on the assigned ratings has been changed from” ‘Positive’ to ‘Stable’. Previous rating action was announced on June 24th 2021.

SL’s textile operations encompass processing, knitting, stitching and export of majorly home-textile products followed by knitted apparels and denim and non-denim garments. Assigned ratings incorporate extensive experience of the sponsors in textile segment and favorable business dynamics for the textile players given shift in orders from regional countries, favorable government policies and sound demand for textile products across Western countries. However, rising cost of doing business, inflationary pressures coupled with rising commodity prices and onset of monetary tightening regime is likely to impact profitability across the entire textile players, going forward.

The revision in outlook incorporates stability in profitability in the ongoing year. The ratings also take note of the undergoing capex to expand business backwards into spinning and weaving segment which is being financed with debt to equity ratio of 60:40 thus impacting the leveraging. Within equity financing, funds will be arranged through internal cash flows, equity injection from sponsors and expected IPO proceeds. However, risk pertaining to obtaining the desired IPO proceeds remain high given dull investor activity at the stock exchange.

Assessment of the financial risk profile exhibits sound profitability metrics coupled with adequate liquidity and capitalization indicators. The Company posted significant jump in net profit during FY21 on account of volumetric growth in sales coupled with higher gross margins. However, during the ongoing year some compression in margins has been noted on account of overall inflationary pressures. Management, however, expects margins to remain at existing level along with volumetric growth in sales going forward. At present, the Company is operating in full scale capex mode coupled with higher debt utilization levels and the expected pressure on liquidity and capitalization is projected to be at manageable levels supported by higher profitability. Maintaining leverage indicators at adequate levels will remain an important rating consideration.

For further information on this rating announcement, please contact Ms. Nisha Ahuja, CFA or the undersigned (Ext: 207) at (021) 35311861-66 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .