Press Release

VIS Assigns Initial Entity Ratings to Shahkam Industries (Private) Limited

Karachi, April 18, 2025: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A2’ (Single A Minus/A Two) to Shahkam Industries (Private) Limited (‘SIL’ or ‘the Company’). 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’ signifies good likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned rating is ‘Stable’.

Headquartered in Lahore, incorporated in March 1992, SIL is an export-oriented knitwear and ready-made garment (from basic to high-end fashion) manufacturing unit with an established operating track record of nearly three decades. Operations are carried out through knitting, dyeing/washing, printing/embroidery and garment finishing divisions. Product portfolio mainly comprises pullover hoodies, shirts, trousers, jackets and denim.

Pakistan’s textile sector faces significant challenges, driven by economic cyclicality, intense competition and structural issues. The sector is highly sensitive to demand fluctuations, making it vulnerable to broader economic conditions. In FY24, cotton production rose by 79%, but a sharp 59.4% decline was recorded by October 2024. While a rebound to 5.55m bales is expected in FY25, challenges like limited cotton acreage, rising energy costs and adverse weather conditions persist. Despite these issues, 1QFY25 textile exports grew, driven by reliance on imported cotton and value-added products. However, profitability remains vulnerable to cotton & yarn price fluctuations, inflation and exchange rate volatility. Additional pressures include a 23% gas price hike for captive power plants in March 2025 and the shift to the Normal Tax Regime (NTR), both of which will increase costs and strain manufacturers’ financial performance.

Ratings take into account the experience of sponsors combined with SIL’s long-standing relationships with customers which includes one of Europe’s largest fashion retail groups. The Company has shown resilience in a challenging textile sector, maintaining customers retention through upscaling and marketing efforts. Operating metrics depicted notable improvement in the outgoing year, enabling SIL to meet growing demand. Subsequently, in FY24, topline increased, contributing to higher profitability. Debt servicing profile improved due to improvement in cash flows while liquidity profile remained adequate. However, leverage indicators were elevated on account of high utilization of short-term debt. Going forward, reduction in gearing while improvement in profitability and debt service ratios in line with projections, will be important factors from the ratings perspective.

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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .