Press Release

VIS Reaffirms Entity Ratings of Umar Spinning Mills Private Limited

Karachi, April 22, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Umar Spinning Mills Private Limited (‘USMPL’ or ‘the Company’) at ‘BBB+/A2’ (‘Triple B Plus/A Two). Medium to long term rating of 'BBB+' indicates Adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous Rating action was announced on February 13, 2024.

USMPL was incorporated in Pakistan as a private limited company in 1991. The registered office of the Company is located in Karachi while its manufacturing plant is in Lahore. USMPL is principally engaged in the manufacturing and sale of Yarn. Furthermore, the Company has recently setup a new salt processing plant at Korangi Industrial Area, Karachi, which is currently in the testing phase. USMPL is a part of The Pervaiz Group of Companies which is a diversified conglomerate in Pakistan with interests spanning from textiles to clearing & forwarding services.

Assigned ratings take into account the business risk profile of Pakistan’s textile spinning sector, which is currently assessed as high to medium. The sector remains exposed to demand cyclicality, competitive pressures, regulatory challenges, and energy cost sensitivity. The spinning segment functions as a key upstream component of the textile value chain, with performance linked to broader economic conditions. Cotton production remained below domestic requirements, with pest infestations and a shift toward higher-margin crops limiting improvement in supply. Export demand remained affected by political uncertainty and shifting global procurement patterns, leading to a decline in order volumes. Regulatory changes, including the withdrawal of the Export Facilitation Scheme (EFS) and transition from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), have increased cost pressures. The sector continues to face competition from regional economies with lower energy costs and a more diversified product portfolio. The withdrawal of regionally competitive energy tariffs and amendments in taxation policies have further impacted industry viability. Rising power tariffs and minimum wage adjustments have increased conversion costs, affecting profitability. The ratings also factor in sponsor support, including financial assistance provided through equity funds and interest-free short-term loans to support the Company’s financial needs.

Assigned ratings incorporate the Company's financial risk profile, reflecting revenue growth alongside persistent cost pressures, leading to margin contraction and falling profitability. Higher sales volumes contributed to revenue growth; however, elevated production cost, particularly energy and raw material expenses, alongside limited pricing flexibility due to heightened competition from imported yarn, led to decline in gross margins. Net margins were further affected by increased finance costs. Capitalization metrics indicate higher leverage, primarily driven by reliance on short-term debt for working capital requirements, with a portion of borrowings sourced from directors and associates in the form of interest-free loans. Liquidity remains stable, supported by improvements in working capital management, including an optimized inventory turnover cycle and an extended payable cycle. However, debt coverage remains constrained due to reduced profitability and higher financial expenses, necessitating reliance on sponsor support to bridge the shortfalls.

Going forward, the ratings will remain sensitive to the Company’s ability to restore profitability and coverage metrics to levels commensurate with the assigned ratings. Additionally, the continued availability of financial support from sponsors will remain an important factor to the assigned ratings.

For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.



Applicable Rating Criteria:
Industrial 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 .