Press Release

VIS Reaffirms Entity Rating of Saya Weaving Mills (Pvt.) Limited

Karachi, April 17, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Saya Weaving Mills Limited (SWML). Long-term entity rating of ‘A-’ reflects good credit quality, and adequate protection factors. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ indicates good certainty of timely payment, with sound liquidity factors. Access to capital market is good and risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on February 22, 2023.

Saya Weaving Mills Limited (“SWML or “the Company”), is engaged in the production and sale of greige, finished fabrics, home textiles, and apparel. The Company operates through two units located in SITE - Karachi, which includes weaving and stitching facilities.

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 time involved in sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to exchange rate risk.

Assigned ratings take into account the Company’s business updates, including capacity expansion project to install new 130 looms, which began in FY19 and was completed in FY23 with the installation of the last 13 new looms. Moreover, a 17% sales growth in FY23 mainly driven by a weakening rupee was recorded. However, profit margins were slightly lower due to higher production costs. The Company has forecasted a 10% sales growth for FY24 with profit margins expected to remain intact.

The assigned ratings also account for the Company's financial risk profile, which demonstrates a satisfactory liquidity position and a healthy debt service coverage ratio. In the fiscal year 2023, the Company issued 11.6 million bonus shares, increasing the total paid-up capital to Rs. 2.3 billion as of June 2023. The first half of fiscal year 2024 saw an uptick in total equity from profit retention while short term borrowings has also increased amid higher working capital requirements. However, Company’s gearing ratio registered an improvement as of December 2023.

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 .