Press Release

VIS assigns Initial Entity Rating to Amna Industries (Private) Limited

Karachi, March 01, 2023: VIS Credit Rating Company Ltd. (VIS) has assigned initial entity rating of ‘BBB+/A-2’ (Triple B Plus/Single A-Two) to Amna Industries (Private) Limited (‘AIL’ or ‘the Company’). Outlook on the assigned rating is ‘Stable’. Long-term rating of ‘BBB+’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors vary depending on changes in economic conditions. Short-term rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors and fundamental protection factors and good access to capital markets. Risk factors are minor.

Incorporated in 2003, AIL is principally engaged in manufacturing and sale of yarn. AIL has a spinning capacity of 37,716 spindles and specializes in production of knitted yarn ranging from 9 singles up to very fine yarn of 80 singles. In addition, the Company has also installed “Fabric Dyeing Unit”, while a knitting segment and garment segment has recently been installed.

The assigned rating incorporate operational track record of AIL and its sponsors, who have had a long standing association with the textile industry operating under the umbrella of Al Karam Textile. Apart from the one-off (10%) contraction in FY20, AIL’s revenue base has depicted an increasing trend on timeline basis, with the topline growing at a CAGR of 16.1% over the past 5-year period (FY18-22). However, given challenges on the macroeconomic front, such as rising input costs coupled with slowdown in the Pakistan’s major export markets, the management expects topline growth to subside in FY23. Furthermore, gross margin has remained stable and strong over the past 3-year period (FY20-22), albeit depicting contraction in Q1’FY23. As per management, given inventory gains, margins are expected to post slight improvement in the remaining part FY23.

Assigned rating incorporates business risk of the spinning business, wherein the performance is sensitive to cyclicality in cotton prices, which is further determined by crop yield. Historically, margins and financial performance of players have depicted seasonality. Moreover, competitive intensity is high due to commoditized nature of the product. However, AIL’s business mix depicts some diversification, with part of the revenue emanating from processing unit. Furthermore, the management has also envisaged further diversification towards finished garments. These measures shall be incorporated into the rating as and when they materialize in significant change in revenue mix.

Assigned rating is constrained by the financial risk profile of the entity, given ‘High to Medium’ level of gearing, which is viewed to be ‘High’ when adjusted for advances extended to associate companies. Even though the cash flow coverage indicators are considered adequate, AIL’s gearing stands on the higher side. Going forward, management has envisaged that gearing will be kept under check, albeit the same is likely to be a challenging task. The assigned rating remain dependent on maintenance of business and financial risk indicators.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 215) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.





Sara Ahmed
Director

Applicable Rating Criteria: Industrial Corporates - August 2021
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .