Press Release

JCR-VIS Reaffirms Entity Ratings of Sadaqat Limited at A-/A-2

Karachi, January 1, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Sadaqat Limited (SL) at ‘A-’ (Single A Minus) and short-term entity rating at ‘A-2’ (A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 23, 2013.
The ratings take into account SL’s persistent growth over the years that has enabled the company to achieve a noticeable threshold in size and operations. SL is considered to be a well managed export oriented company having a niche in value added fabrics and home textile. The margins, though declined slightly on a timeline basis, continue to remain relatively high owing to focus on value addition and improving efficiencies.
In order to diversify its customer base, SL has setup local retail stores in different cities while tapping new export markets including Australia and South Africa. The management plans to open few more local retail outlets in the ongoing year.
Recently, the company utilized alternative sources of energy to ensure smooth operations by curtailing breakdowns in production process. The company also added thermosol dying machine to its product range to enhance efficiency. To meet the CAPEX requirements, SL availed long-term syndicated loan worth about Rs. 1b in FY14. In the ongoing year, SL plans to procure automatic stitching machine that is likely to enhance stitching capacity by two-folds. Going forward, the company plans to consolidate its textile operations while diversifying into ventures other than its core business.
By end-FY14, leverage indicators stood slightly higher on account of increase in borrowings; however the same has remained within manageable limits. Moreover, with the increase in FFO, the debt servicing capacity remains adequate. At current debt levels, the principal payments due in the ongoing year are expected to be comfortably met through internal cash generation. Meanwhile, the company plans to issue rights shares worth Rs. 250m in the ongoing year; which would result in improved gearing.The management also intends to enlist SL on the stock exchanges that will be done either through issuing fresh capital or by partially selling the existing shares of sponsor directors. JCR-VIS will closely monitor the above mentioned plans of the company and may take a necessary action, if required.
For further information on this rating announcement, please contact Mr. Maimoon Rasheed at 042-36610681-84.

Abdur Rahim ACII
Advisor
Applicable Rating Criteria: Industrial Corporates (October 2003)

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