Press Release

VIS Maintains Entity Ratings of Shahtaj Textile Limited

Karachi, December 29, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Shahtaj Textile Limited (STL) at ‘A-/A-2’ (Single A Minus/A-Two). Long-term rating of ‘A-’ signifies good credit quality and adequate protection factors; risk factors may vary with possible changes in the economy. Short-term rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound while access to capital markets is good; risk factors are small. Outlook on the ratings has been revised from ‘Rating Watch-Developing’ to ‘Stable’. Previous rating action was announced on April 24, 2020.

Shahtaj Textile Limited (STL), a part of ‘Shahnawaz Group’, is about to complete two decades in the business of manufacturing and sale of grey fabric. The group owns five other companies and has presence in sugar, food, distribution and engineering related sectors. Headquartered in Karachi, STL has its manufacturing facility located in Lahore. Although the company also caters to export markets, majority of sales constitute local and indirect export sales.

The revision in rating outlook, given the ongoing Covid-19 situation, captures the performance of STL in 1Q’FY21, as reflected by higher topline vis-à-vis SPLY and recovery in gross margins. Given reduction in benchmark rates, the financing cost for the company has also reduced considerably, reflecting positively on the bottom line. Going forward, favorable industry outlook due to strong demand in the ongoing year ease the business risk concerns. Moreover, ratings continue to factor in the strong sponsor strength. Leverage and liquidity indicators have remained satisfactory, however, maintenance of the same in line with the threshold is considered important from a rating perspective, particularly given worldwide continuation of Covid-19 and its expected new variant.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 205) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk




Javed Callea
Advisor

Applicable Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx

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