Press Release

VIS Reaffirms Entity Ratings of Rajby Textiles (Private) Limited

Karachi, June 03, 2021: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Rajby Textiles (Private) Limited (RTPL) at ‘A-/A-1’ (Single A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Long term entity rating of ‘A-’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Risk factors are minor. Previous rating action was announced on April 24, 2020.

The assigned ratings incorporates extensive experience of sponsors, moderate business risk profile, and satisfactory liquidity and capitalization indicators. The rating incorporates business risk arising from volatility in cotton yarn prices, which affects the sector gross margins. During FY20, the industry has undergone a slowdown, as global consumer spending on garments was affected by pandemic-induced lockdowns globally.

RTPL’s topline contracted by 7% YoY in FY20, mainly driven by 40% decline in exports volume. In the ongoing year, the company’s topline has depicted improvement and the management projects strong growth for FY21 vis-à-vis preceding year. Gross margin, after experiencing a dip in FY20, has depicted improvement in the ongoing year. RTPL’s topline & gross margin stands slightly lower than the median of similar rated companies during the period under review.
In line with the contraction in topline and squeeze on margins, cash flow coverage indicators did come under stress. However, based on the improved sales performance in H1’FY21, the cash flow coverage indicators have depicted improvement and are considered to be aligned with peers. Overall capitalization metrics are also aligned with the peers. The assigned rating remains dependent on maintenance of business & financial risk indicators, in line with the threshold for the assigned rating.

For further information on this rating announcement, please contact Mr. Arsal Ayub (Ext: 216) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk .



Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates - April 2019
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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