Press Release

VIS Maintains Entity Ratings of J.K Spinning Mills Limited

Karachi, April 28, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of J.K Spinning Mills Limited (JKSML) at ‘A-/A-1’ (Single A-Minus/A-One). The medium to long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payments coupled with excellent liquidity and fundamental protection factors. Outlook on the assigned rating has been revised from ‘Rating Watch-Developing’ to ‘Stable’. Previous ratings action was announced on April 24, 2020.

JKSML, a part of J.K Group, is a composite textile unit that operates spinning, weaving, processing and stitching divisions. Product portfolio of the company mainly comprises course yarn and home textile. Majority shareholding is held by the sponsoring family who is actively involved in the company affairs. Net sales comprise a mix of local and export sales, with yarn majorly sold in local markets, while processed fabric and made-ups are largely exported.

The assigned ratings take into account steady growth in revenues and improved profits generation in FY20 despite the outbreak coronavirus pandemic, driven largely by higher fabric exports and favorable selling price. JKSML exhibited sustained performance in terms of revenues and profitability with largely stable mix of local yarn sales and fabric exports in HY21. The ratings draw comfort from recent notable enhancement of yarn spinning and fabric processing operations. Establishment of a new mid-sized spinning unit having 52,896 spindles is already underway and is expected to be completed by end-FY22. Moreover, the company plans to setup a new weaving unit having 144 air jet looms by end-FY24. Both projects are planned to be funded through a mix of 60% debt and 40% equity, and are expected to contribute considerably towards the future growth trajectory of the company.

The ratings factor in healthy cash flows generation and adequate capacity to meet financial obligations, as reflected in improved debt service coverage ratio and stable FFO-to-total debt ratio during HY21. The ratings draw comfort from maintenance of capitalization at prudent levels as the impact of mobilization of the SBP’s TERF and LTFF facilities for capex on spindles, processing division, solar plant, and as salaries loan, was offset by growth in equity base on the back of profits retention. Going forward, leverage indicators are projected to be maintained at comfortable levels over the rating horizon.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk




Faryal Faheem Ahmed
Deputy CEO

VIS Entity Rating Criteria: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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