Press Release

VIS Reaffirms Entity Ratings of Rajby Textiles (Private) Limited

Karachi, Sep 03, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) for Rajby Textiles (Private) Limited (‘RTPL’ or ‘the Company’). Medium to Long Term Rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on July 14, 2023.

Ratings take into account sponsor profile of Rajby Group, a leading player in the textile sector. RTPL specializes in denim fabric production, with operations including weaving and finishing. Production infrastructure is based in 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 after a decline in FY23, the Company's sales registered a rebound in FY24, remain in-line with the industry trend. Gross margin improved in FY23 due to rupee depreciation and decrease in overheads. Given the downturn in topline and higher finance cost, net profit contracted in FY23; the same also decreased in 9MFY24 compared to same period last year. Top 10 clients contributed around one-third of total revenue.

The assigned ratings also account for the Company’s financial risk profile. During the period under review, liquidity profile of the Company remained adequate along with satisfactory cashflow coverage. With the absence of any new long term debt mobilization on the balance sheet while short term borrowing has also decreased, capitalization indicators have registered improvement during the review period. Simultaneously, debt service coverage has also improved with lower financial obligations due to reduction in debt levels. Going forward, maintenance and improvement of profitability, coverages and capitalization indicators will remain important rating drivers.

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 .