Press Release

VIS Upgrades Entity Ratings of International Textile Limited

Karachi, April 18, 2023: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of International Textile Limited (ITL) to ‘A/A-2’ (Single A/A-Two) from ‘A-/A-2’ (Single A Minus/ A Two). Medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ signifies 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 rating is ‘Stable’. Previous rating action was announced on February 09, 2022.

Ratings incorporates extensive 38-year track record, vertically integrated operations, notable revenue growth with improved profitability margins and cash flows, satisfactory liquidity position and all-out profit retention supporting equity base growth while sustaining leverage ratios. Ratings also take note of enhanced emphasis towards digitization for improved monitoring and reporting integration. While overall governance framework is satisfactory, room for improvement exists in terms of segregating ownership and management. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, high interest rate situation, inflationary pressures, higher electricity costs and demand slow down pose risks on the sector over the medium term. Ratings are constrained by current weak macroeconomic environment globally and locally.

Almost entire revenue comes from exports, with only wastages being sold locally. After a challenging year due to pandemic, strong YoY revenue growth of ~59% in FY22 was driven by both volumetric uptick and higher prices in dollar terms coupled with rupee depreciation. Sales volume in the current fiscal year is slightly impacted by global slowdown. Product mix consists of about 60% terry products and 40% yarn and garments, with significant sales stemming from specific items like bath towels, bath sheets, aprons, hand towels and etc. Geographic sales mix depict concentration as nearly two-third of exports are directed towards US and the rest is shared by European markets. Client concentration also remains high, with top ten clients consistently generating more than three-fourth of total sales.

It is pertinent to note that a positive turnaround in bottom-line was driven by strong revenue growth and recovery of gross margins during the review period. Debt portfolio predominantly comprises short-term debt, with total interest-bearing liabilities noting a declining trend as management opted to utilize internally generated capital to fulfil working capital needs. Going forward, maintenance of gearing ratio and margins will remain important for ratings.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext: 306) at (021) 35311861-4 or email at info@vis.com.pk



Faryal Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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