Press Release

VIS Assigns Initial Entity Ratings to HKB Retail (SMC-Pvt) Limited

Karachi, September 30, 2022: VIS Credit Rating Company Ltd. has assigned entity ratings of HKB Retail (SMC-Pvt) Limited (HKB) at ‘A-/A-3’ (Single A Minus/A-Three). The medium to long-term rating of ‘A-’ signifies good credit quality with strong protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-3’ signifies timely payment of obligations coupled with satisfactory company fundamental and liquidity factors. Outlook on the assigned rating is ‘Stable’.

The ratings assigned to HKB Retail (SMC-Pvt.) Limited (HKB) incorporate its presence in retail clothing industry as an emerging player, mainly targeting relatively younger market segment. The Company had two clothing brands ‘Beechtree’ and ‘Pepperland’ since its establishment while a new brand ‘Morbagh’ was launched in the outgoing year, to cater to the demand of traditional outfits. Sales have exhibited significant growth over the years with higher brand recognition developed over the years. The Company possesses strong margins at the gross level, while net margins have also somewhat improved mainly on the back of rationalization of operating expenses and economies of scale. The management is in process of expanding its retail footprints to support growth, which is expected to contribute towards margin improvement through economies of scale. Positive prospects of retail clothing industry in view of younger demographics, increase in internet penetration bodes well for the Company, however, in the backdrop of rising inflation and pressure on GDP growth, the sector remains vulnerable to possible demand contraction.

Assessment of financial profile indicates adequate liquidity profile in terms of cash flow coverages and debt servicing and manageable working capital cycle. The Company is in the process of implementing a new ERP platform, which is expected to improve inventory management and in turn influence liquidity profile favorably. Capitalization indicators, on a timeline basis, have recorded notable improvement led by higher profitability and equity injection by sponsor, however, remains on the higher side. Ratings remain underpinned on continued sponsor support in bringing the capitalization indicators in line with the benchmarks for the assigned ratings. Going forward, achievement of projected plans along with improvement in liquidity and capitalization indicators will remain important for ratings.

For further information on this rating announcement, please contact Ms. Syeda Batool Zehra Zaidi (Ext: 210) or the undersigned (Ext: 306) at (021) 35311861-66 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (August 2021)

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