Press Release

VIS Maintains Entity Ratings of Khalid Shafique Spinning Mills Limited

Karachi, June 03, 2024: VIS Credit Ratings Company Ltd. (VIS) has maintained entity ratings of Khalid Shafique Spinning Mills Limited (‘KSSML’ or ‘the Company’) at BBB+/A-2 (‘Triple B Plus/A-Two’). Medium to 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’ signifies 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 ratings has been revised from ‘Negative’ to ‘Stable. The previous rating action was announced on June 20, 2023.

KSSML is a Public Limited Unlisted Company incorporated on April 23, 1992. The registered office of the Company is situated at 115-P. M. M. Alam Road, Gulberg - II. Lahore in the Province of Punjab. The manufacturing unit of the Company is located at 1.6 KM Off Roosa Village Stop, 8 KM Manga Raiwind Road, District Kasur. The principal activity of the Company is textile spinning.
Assigned ratings incorporate the constrained business risk profile of KSSML, stemming from its exposure to economic cyclicality and intense competition within the spinning sector in Pakistan. The sector's vulnerability to fluctuations in demand driven by economic factors poses inherent risks to the entity's performance.

Assigned ratings also integrate the profitability, capitalization, liquidity, and coverage profiles. The profitability profile reflects constraints due to elevated input costs and inflation in FY23, exacerbated by a fire incident in 3QFY24, impacting gross, operating, and net margins. The capitalization profile, while remaining conservative, saw a temporary deterioration in FY23 due to increased short-term debt drawdown. Liquidity, although healthy, experienced erosion in FY23 but improved in 3QFY24 despite challenges. The coverage profile depicted severe stress in FY23, attributed to subdued profitability and higher financial charges, though showing a slight recovery in 3QFY24.

Change in outlook to Stable is supported by the Company’s sufficient liquidity profile and low capitalization, and improvement in coverage, despite challenges. However, ratings will remain sensitive to the Company’s ability to recover its eroded profitability, coverage profiles to historical levels, while maintaining its capitalization and liquidity profiles to be commensurate with assigned ratings moving ahead.

For further information on this ratings announcement, please contact 021-35311861-64 (Ext. 201) 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

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