Press Release

VIS Assigns Positive Outlook to Arshad Textile Mills Limited

Karachi, August 27, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Arshad Textile Mills Limited (ATML) at ‘BB+’/A-3 (Double B Plus/A-Three). Outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Positive’. The medium to long-term rating of ‘BB+’ denotes that obligations deemed likely to be met. Protection factors are capable of weakening if changes occur in the economy. Overall quality may move up or down frequently within this category. The short-term rating of ‘A-3’ denotes timely payment of obligations coupled with satisfactory company fundamental and liquidity factors. Previous rating action was announced on April 28, 2020.

ATML is principally involved in the manufacturing and sale of cotton-blended yarn. ATML is a part of Arshad Group and shareholding is mainly vested with the sponsoring family who are actively involved in the day-to-day operations of the company. The ratings incorporate growth in sales in the ongoing year mainly on back of higher yarn sales. Sales declined in FY20 as the company was not able to secure tender sales order from government departments. Given involvement of competitive bidding process, fabric sales have witnessed volatility over the years. The leverage indicators somewhat improved during 9MFY21. However, given mobilization of bank borrowings for the purpose of capital expenditure, the same has increased again by end-FY21. Given capacity constraints amidst nearly full capacity utilization, the management has embarked upon capacity enhancement, expected to come online by end-CY21. Debt service coverage has remained adequate. The positive outlook signifies expected growth in revenues and profitability along with improvement in leverage indicators on account of profit retention and planned equity injection. Meanwhile, the ratings will remain sensitive to any further increase in gearing and maintenance of adequate coverages.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk


Faryal Ahmad Faheem
Deputy CEO


Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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