Press Release

VIS Reaffirms Entity Ratings of Umar Spinning Mills (Private) Limited

Karachi, February 13, 2024: VIS Credit Rating Company Limited ('VIS') has reaffirmed the entity ratings of Umar Spinning Mills (Pvt.) Limited (‘USML’ or ‘the Company’) at 'BBB+/A-2' ('Triple B Plus/A-Two'). Long-term rating of ‘BBB+’ reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of ‘A-2’ denotes good certainty of timely payments; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains 'Stable'. Previous Rating action was announced on March 13, 2023.

Umar Spinning Mills Private Limited (‘USMPL’ or ‘the Company’) was incorporated in Pakistan as a private limited company in 1991. The registered office of the Company is located at Commerce Centre, Hasrat Mohani Road, Karachi, while its manufacturing facility is situated in Raiwind, Lahore. The Company is principally engaged in the manufacturing and sale of yarn.

Assigned ratings for USML incorporate a constrained business risk profile attributed to the spinning sector’s susceptibility to economic cyclicality and heightened competition. The spinning sector in Pakistan, comprising of over 400 mills, faced challenges from various economic and environmental factors, including crop damage by flooding and inflation in FY23. Prospects of cotton production in ongoing season are favorable as compared to last cotton season but still below expectations. However, the sector's performance is closely tied to broader economic conditions, rendering it vulnerable to demand fluctuations.

Assigned ratings also consider the Company's financial risk profile. The profitability profile takes into account the gross margin compression experienced in FY23 due to increased raw material costs, and high inflationary pressure, despite improvement in the top line. Net margins further suffered from escalating finance costs, driven by domestic policy rate hikes and higher debt drawdowns. Profitability has remained under pressure in 1QFY24. The capitalization profile, while experiencing deterioration, remains adequate with assigned ratings. Meanwhile, coverage, while historically healthy, has been strained by deterioration in the profitability profile during FY23 and 1QFY24. Nevertheless, the Company's liquidity profile continues to provide adequate support to assigned ratings.

Going forward, ratings are underpinned by continued sponsor support and will remain sensitive to the Company’s ability to improve its profitability and coverage profiles. Moreover, maintenance of capitalization and liquidity metrics commensurate with assigned ratings will also be important considerations for future reviews."

For further information on this ratings announcement, please contact Saeb Muhammad Jafri at 021-35311861-64 (Ext. 202) and/or the undersigned at 021-35311861-64 (Ext. 201) or email at

Javed Callea

Applicable Rating Criteria: Corporates

VIS Issue/Issuer Rating Scale

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