Press Release

VIS Maintains Entity Ratings of Rajby Industries

Karachi, June 07, 2022: VIS Credit Rating Company Limited has maintained entity ratings of Rajby Industries (RI) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Long Term Rating of ‘A-’ signifies good credit quality and adequate protection factors. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good and risk factors are small. The previous rating action was announced on June 03, 2021.

Assigned ratings take into account RI’s moderate business risk profile, reputed clientele and satisfactory coverages against debt obligations. During FY21, the industry showed signs of recovery as the level of global consumer spending gradually went up, after ease in COVID-19 induced lockdowns. The order book for the industry is expected to remain adequate in the ongoing year along with transfer orders of neighboring countries, easing our business risk concerns. Rising costs of freight and raw material prices continue to pose a challenge for the sector, however, the same was offset by influx of international orders of regional players.

Topline of the Company fell by about 10% during FY21, as the Company reduced its overall capacity in response to demand slowdown due to COVID-19 and experienced a decline in sales volumes. However, recovery in revenue base was observed in 1HFY22, which was mainly attributable to a rise in average selling price and currency devaluation. After reporting a loss in FY20, the Company has posted profits in FY21 and HY22 with the quantum of the same rising on a timeline basis, attributable to inventory gains supported by higher average selling price per piece led by the depreciation of PKR. This, coupled with lower finance cost, translated into higher net margins, as operating expenses remained at similar level. With increasing interest rate environment and increased working capital requirements amidst rising commodity prices, maintenance of profitability indicators is considered important from a ratings perspective.

Liquidity indictors weakened in FY21, but depicted a pattern of recovery during 1HFY22. Leverage indicators continue to remain at elevated levels, despite experiencing some decline in the review period led by profit retention augmenting partners’ capital base. Comfort is drawn from the presence of long-term interest free loan from sister concern. With no significant addition to the quantum of long-term debt projected going forward, leverage indicators are expected to remain within manageable levels. Presence of long-term interest free loan from the sister concern over the rating horizon is considered important.
For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext. 207) at 021-35311861-70 or email at info@vis.com.pk.


Sara Ahmed
Director

Applicable Rating Criteria: Industrial 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 .