Press Release

VIS Upgrades Entity Ratings of Kamal Limited

Karachi, April 28, 2022: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Kamal Limited (KL) from ‘A-/A-2’ (Single A Minus/A-Two) to ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Outlook on the assigned rating has been revised from ‘Positive’ to ‘Stable’. The previous rating action was announced on April 12, 2021.

The assigned upgrade of ratings takes into account the company’s predominant presence in export-oriented, value-added textile segment, market diversification with fair share in domestic market both in terms of branded and non-branded sales and product portfolio variety involving yarn, fabric, home textiles and garments. The in-house integrated facility gives the company a competitive advantage of complete control over the quality and the production process; lately the company has reduced its reliance on procurement of fabric from open market on account of capacity enhancement of both spinning and weaving divisions. The company has depicted healthy growth in revenue and profits during FY21 and HY22 mainly on account of increase in volumetric sales of key products including yarn, made-ups, and fabric, as well as improved prices. Maintaining the momentum of growth in revenues with prudent financial metrics would be important, going forward.

Profit margins have depicted some weakness during the ongoing year as the company has not been able to pass on the full impact of significant increase in price of yarn and fabric. Liquidity profile of the company is considered adequate and is supported by internal cash flows generation, which has improved in line with the profits, resulting in adequate capacity to meet financial obligations. Gearing and leverage indicators are considered on the higher side on account of increased utilization of sizeable short-term borrowings for elevated working capital requirements, owing to increase in prices, and mobilization of new long-term loans to fund the capex. Going forward, leverage indicators are expected to remain around current levels as the impact of new long-term loans will be offset by accumulation of equity base. The ratings are dependent on realization of revenue targets, improvement in margins, maintenance of liquidity and debt servicing coverages, and rationalization of leverage indicators.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk









Faryal Ahmad Faheem
Deputy CEO

VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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