Press Release

VIS Maintains Entity Ratings of Sitara Textile Industries Limited

Karachi, February 01, 2024: VIS Credit Rating Company Limited has maintained entity ratings of Sitara Textile Industries Limited (‘STIL’ or the ‘Company’) at ‘BBB+/A-2’ (Triple B Plus/A-Two). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes 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 ‘Stable’ to ‘Negative’ status. Previous rating action announced on December 31, 2021.

STIL, with over thirty years of experience, specializes in processing and exporting home textiles, operating under the Mian Anees Group after the division of the prominent Sitara Group. The Company is family-owned, featuring a four-member board with a female director and an organizational structure that encompasses processing, marketing, and a finance department overseen by the CEO. Assigned ratings incorporate elevated business risk due to a weak macroeconomic environment, high-interest rates, inflationary pressures, rising raw material costs, the ongoing energy crisis in the country, and a global slump in demand.

The rating takes into account a significant decline in topline performance during FY23, primarily due to a decrease in demand orders, resulting in net sales falling by approximately 25% year-over-year. The Company's sales are mostly generated through exports, with a moderate concentration risk among its top ten clients who contribute about 55% of total sales revenue. The Company has achieved higher margins in FY23, due to the depreciation of the rupee and a reduced reliance on imported materials, with gross margins reaching historic highs. However, net margins have declined over time, largely due to increased finance costs associated with higher benchmark interest rates.

Revision in outlook is based on the entity's cash flow coverage indicators which suggests room for improvement, with debt servicing coverage ratio falling below the threshold of 1x. The liquidity profile is deemed adequate with a current ratio above 1, although the net cash conversion cycle has increased due to higher inventory holdings and receivable days. Equity growth has been modest, and despite a stable debt profile, the entity's leverage ratio has increased to 2.45x, while the gearing ratio has slightly decreased to 1.21x in FY23. Improving the profitability and cash flow coverage ratios will be critical for the maintenance of entity's rating going forward.

For further information on this ratings announcement, please contact Mr. M. Amin Hamdani at 021-35311861-64 (Ext. 217) and/or the undersigned at 021-35311861-64 (Ext. 201) or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates
VIS Issue/Issuer Rating Scale

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