Press Release

VIS Reaffirms Entity Rating of Rizwan Enterprises

Karachi, August 21, 2024: VIS Credit Rating Company Limited (VIS) reaffirms the entity ratings of ‘A-/A-1’ (Single A Minus/A-One) for Rizwan Enterprises. Long-term entity rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk is modest but may vary from time to time because of economic conditions. Short-term rating of ‘A-1’ indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on May 29, 2023.

Rizwan Enterprises (‘RE’ or ‘the Company’) has been operating for more than 4 decades as a medium-sized partnership concern, primarily focused on weaving, sizing and stitching. However, fabric processing, bleaching and printing are outsourced to third-party vendors. Product portfolio comprises greige fabrics, finished fabrics, organic bedding, hospitality and healthcare fabrics and pocketing.

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 lengthy process of sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.

Assigned ratings take into account the Company’s business updates, whereby Company’s sales decreased in FY23 due to reduced demand. However, rebound in sales volume is noted in 9M’FY24. The Company’s gross margins followed a declining trend in FY23 and 10M’FY24 attributed to high cost of fuel and power during the period. Similarly, the Company's net margins also remained under pressure due to reduced gross margins and rising energy costs during the review period. Looking ahead, the Company anticipates an increase in margins, driven by the recovery in demand and Company’s aim to focus on value-added products.

The assigned ratings also account for the Company's financial risk profile. The Company showcases a healthy liquidity profile and a healthy Debt Service Coverage ratio. As of Jun’23, the Company's equity increased due to strong profit retention, while total borrowing decreased, leading to an improved capitalization profile. The ratings are dependent upon recouping margins and profitability profile, going forward.

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 .