Press Release

VIS Assigns Positive Outlook to Entity Ratings of Naveena Industries Limited

Karachi, February 28, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Naveena Industries Limited (NIL) at ‘BBB+/A-2’ (Triple B Plus/A-Two). Long Term Rating of BBB+ reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short Term Rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. Previous rating action was announced on December 31, 2018.

The revision in NIL’s rating outlook incorporates favorable business risk profile, and improvement in financial profile. Business risk profile is characterized by supportive government policies for the textile sector, especially export oriented companies, and elevated demand on account of diversification efforts pursued by international players.

Profitability profile of the company depicted improvement on account of increasing topline and margins. Net sales increased by 22.6% in FY19 on the back the higher average selling prices due to rupee devaluation and higher demand. Efficient procurement of raw materials and cost savings in utilities expenses translated to higher margins and bottom-line. Going forward, growth trend is expected to persist in profitability in view of favorable operating environment and higher selling prices.

Although overall quantum of debt increased due to higher utilization of short term borrowings to fund working capital requirements, leverage indicators were reported lower due to greater increase in equity base on account of profit retention. Leverage indicators may increase in the medium term as the management plans to undertake additional debt to fund its BMR activities; however, the same are expected to remain at manageable level. Liquidity profile of the company is considered adequate and draws support from growing cash flows, sound debt coverage metrics and extended repayment period for additional long-term debt to be undertaken in future. Cash flows will be supported by higher profitability, going forward. Corporate governance framework depicts room for improvement.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.


Jamal Abbas Zaidi
Advisor

Applicable Rating Criteria: 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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .