Press Release

VIS Reaffirms Entity Ratings of Z.A. Corporation (Pvt.) Limited

Karachi, May 08, 2024: VIS Credit Rating Company Limited reaffirms entity ratings of Z.A. Corporation (Pvt.) Limited ('ZAC' or 'the Company') at 'BBB+/A-2' ('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 '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. The outlook for assigned ratings remains “Stable”. Previous Rating action was announced on April 03, 2023.

Z.A. Corporation (Pvt.) Limited is a medium-sized spinning unit located in Faisalabad. Shareholding of the Company is vested with Sheikh Danish Ali who is actively involved in day-to-day affairs of the Company. The principal activity of the Company is manufacturing and sale of yarn. Registered office and mills of the Company is located at 22 K.M Sheikhupura Road, Khurrianwala, District Faisalabad in the province of Punjab. ZAC produces a wide range of coarse and fine counts, from 16/s to 80/s. The Company can produce yarn of 100% cotton, blended and synthetic, and polyester/cotton blends, however, the sales mix depends on the customer orders.

Assigned ratings 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.

Ratings also consider the Company’s financial risk profile. The profitability profile reflects stable topline supported by increasing selling prices, albeit with pressure on margins due to elevated inflationary environment and escalating raw material costs. The capitalization profile is deemed adequate with improving metrics, attributed to a reduction in debt utilization. However, the coverage profile is constrained by weakened operational margins, leading to deterioration in the debt service coverage ratio. On the other hand, the liquidity profile remains adequate, with improvements noted in the current ratio and a manageable cash conversion cycle.

Going forward ratings will remain sensitive to the Company’s ability to recover its profitability and coverage to be commensurate with assigned ratings. Moreover, maintenance of the capitalization and liquidity profile will also be key rating considerations for future reviews.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at

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