Press Release

VIS Maintains Entity Ratings of Zaman Textile Mills (Pvt.) Limited

Karachi, January 25, 2021: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of ‘A-/A2’ (Single A Minus/Single A-Two) to Zaman Textile Mills (Pvt.) Limited (ZTML). Rating outlook has been revised from ‘Rating Watch Developing’ to ‘Stable’. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals, and good access to capital markets. Risk factors are small. The previous rating was announced on April 24, 2020.

ZTML is a family-owned business, which is principally engaged in manufacturing, processing, sale and trading of yarn and fabric. The product portfolio of the company includes coarse yarn (20-30s), greige & dyed fabric that is sold in the local market, whereas coarse yarn (20d), hospital gowns, home textiles, greige & bleached fabric are sold in the export market. The company operates through two factories located at Kotri Industrial Estate near Hyderabad and at Landhi Industrial Area, Karachi. Major portion of revenues are generated through local sales.

Assessment of financial risk profile incorporates improving gross profitability, and weakening in liquidity and capitalization indicators. Sales revenue depicted healthy growth in FY20 provided by higher fabric and toll manufacturing sales. Going forward, proportion of export sales and value added fabric in sales mix is expected to increase. Moreover, gross margins are projected to improve on the back of enhanced operational efficiencies and increase in proportion of revenues from value added products. Elevated financial charges during the review period led net profits to decline. Consequently, liquidity profile witnessed weakening; improvement in coverages over the rating horizon is considered important from ratings perspective. Leverage indicators continue to increase on a timeline basis, mainly due to extended working capital cycle and expansion plans. Given future plans of debt drawdown to finance expansion across the value chain, and gradual impact of the same on profitability, VIS expects gearing and leverage indicators to increase in the medium term. Assigned ratings are dependent upon continued sponsors support for capitalization and maintaining prudent gearing levels going forward.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.


Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .