Press Release

VIS Reaffirms Entity Ratings of HKB Retail (SMC Pvt.) Limited

Karachi, January 11, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed 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-’ indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-3’ denotes satisfactory liquidity and other protection factors qualify entities/issues as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on September 30, 2022.

The Company operates in a highly competitive mid-range retail clothing sector, focusing primarily on a younger demographic. It manages two clothing lines, 'Beechtree' and 'Morbagh', which serve the needs of women for both stitched and unstitched apparel. 'Beechtree' tends to offer a more contemporary style, whereas 'Morbagh' leans towards traditional attire. Additionally, 'Pepperland' is their brand dedicated to children's clothing. In FY23, the Company posted a YoY growth of ~24% in its topline. Despite various economic challenges, and intense competition, the company prudently managed its inventory and profit margins while also broadening its market presence.

The liquidity profile of the Company is underpinned by adequate cash flows in relation to outstanding obligations. The Company has remained focused on improving inventory management and achieving overall operational efficiencies. In pursuit of this goal, it has recently implemented an advanced ERP platform in the past year. Going forward, improvement in cash flow coverages and working capital management will remain imperative for ratings. The capitalization profile of the Company is underpinned by profit retention and continued sponsor’s support in form of interest free loans. Although leverage indicators have improved, they have remained relatively on the higher side. Going forward, realizing the projected plans amidst current macroeconomic challenges will be crucial for ratings.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-12 (Ext. 8005) and/or the undersigned at 021-35311861-64 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria:

VIS Rating Criteria: Industrial Corporates (May 2023)

VIS Issue/Issuer Rating Scale

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