Press Release

VIS Reaffirms Entity Rating of Akhtar Textile Industries (Private) Limited

Karachi, July 30, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Akhtar Textile Industries (Private) Limited (‘ATIL’ or ‘the Company’) at A/A-2’ (‘Single A /A-Two’). 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’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on April 14, 2023.

ATIL is part of Akhtar Group of Companies, which has presence in various sectors including textile (with primary focus on denim), dairy, and power. With nearly four decades of operational history, ATIL specializes in exporting denim products such as shorts, pants, and skirts. The head office and factory units are located in Karachi. The company is currently in process of installing another denim unit, which is expected to be completed by FY25.

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 and other dues from government. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.

Assigned ratings consider the Company’s business updates wherein ATIL’s revenue in FY23 depicted strong growth mainly due to rupee depreciation. Gross margins noted an improvement; while net margins remained intact, due to increased pressure from operational cost and financial charges. In 1H’FY24, the Company experienced a substantial increase in net sales vis-à-vis SPLY, driven by higher selling prices coupled with slight improvement in volumetric sales; however, gross and net margins deteriorated due to higher manufacturing and finance costs as compared to the same period last year.

The assigned ratings also take into account the Company’s financial risk profile which exhibited manageable cashflow and liquidity indicators wherein Debt Service Coverage Ratio (DSCR) remained adequate. Current ratio marginally improved during the review period. Despite augmentation in core equity, gearing marginally improved, while leverage slightly weakened due to pressure on cashflows. In the medium to long term, the management expects to mobilize internally generated cashflows or in other cases move to subsidized industrial loans for import of plant and machinery for its new unit which is currently under construction. Going forward, improvement in profitability and capitalization indicators is important from 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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .