Press Release

VIS Upgrades Entity Ratings of Shahbaz Garments (Private) Limited

Karachi, July 26, 2021: VIS Credit Rating Company Limited (VIS) has upgraded entity ratings of Shahbaz Garments (Private) Limited (SGL) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). Long term rating of ‘A-’ signifies 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 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 to ‘Stable’ from ‘Rating Watch - Negative’. Previous rating action was announced on April 30, 2020.

The rating upgrade takes into account SGL’s significant improvement in margins, leverage indicators and debt coverage levels on a timeline basis together with a sizeable liquidity present on the books. The Company is well aligned in peer group given its healthy margins and conservative capital structure. Moreover, ratings continue to factor in the strong Group strength and Company’s specialized business of industrial gloves with long-standing clients, integrated production facilities and comprehensive product suite. This along with SGL’s relatively better positioning in comparison to small-scale glove producers provides comfort to business risk profile. Going forward, management plans to expand capacity of its spinning and glove manufacturing facilities by ~50% at a total estimated cost of Rs. 1.3b. The project will have a debt to equity ratio of around 60:40 and is expected to come online by 1Q’22.

Despite the debt draw down planned for expansion, leverage indicators are expected to remain within manageable levels on account of projected improvement in equity base. Profitability margins have depicted a rising trend over the last four consecutive years on the back of efficient procurement, production efficiencies and enhanced focus on higher margin products. Going forward, margins are expected to sustain while growth in profitability will be a function of projected increase in production volumes. Ratings remain dependent on continued maintenance of sound performance and financial indicators.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk .



Faryal Ahmed Faheem
Deputy CEO

VIS Entity Rating Criteria Industrial Corporates (May 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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .