Press Release

VIS Assigns Initial Entity Ratings to Siara Textile Mills (Pvt.) Limited

Karachi, November 10, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to Siara Textile Mills (Pvt.) Limited (STML). The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’.

STML is a small-sized spinning unit, with shareholding vested with the sponsoring family who is actively involved in day-to-day operations of the company. The assigned ratings factor in cyclicality and competitive intensity for spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, rising interest rates, inflationary pressures, and higher electricity costs pose risks on the sector over the medium term. Ratings are constrained by current weak macroeconomic environment globally and locally. Hence, meeting projected growth targets and maintaining financial risk profile will be important for ratings. The ratings draw comfort from growth in scale of operations, improvement in profitability indicators and gradual enhancement of equity in the past two years resulting in increased financial flexibility. On the other hand, leverage indicators have increased on account of higher borrowings to fund capital expenditure and increasing working capital requirements. The ratings also incorporate management’s focus on expanding the scale of operations with the setup of additional 10,000 spindles expected to come online by end-Oct’22. Going forward, sales are projected to escalate in line with adequate orders in pipeline along with ongoing expansion. However, the ratings remain sensitive to any adverse changes in regulatory duties, lack of revenue diversification and limited scale of operations. The ratings are dependent on sustenance of margins, realization of projected targets, incremental cash flow generation from recent capital expenditure and maintenance of leverage indicators coupled with evolution of sector dynamics.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk.


Sara Ahmad
Ratings Director

Applicable rating criterion: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .