Press Release

JCR-VIS Assigns Initial Ratings to Shahtaj Textile Limited

Karachi, December 14, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings to Shahtaj Textile Limited (STL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned rating is ‘Stable’.

Assigned ratings of STL derive strength from its sponsor Shahnawaz Group, a renowned and well established business group of the country. Ratings also take into account the company’s stable financial profile supported by adequate liquidity and capitalization indicators. Recent initiatives to improve production capacity and plant efficiency are expected to support operational performance indicators in the foreseeable horizon.

Textile industry in Pakistan is largely export-oriented and contributes around 3/5th towards exports revenues. However, export of textile in the country has been showcasing negative growth for the past few years. This downward trajectory movement in exports continued during FY17. The sector is losing its competitiveness at the international level due to a number of challenges at global and domestic levels.

Given the uncertain situation of the industry, sales of the company have remained subdued for the past few years. However, despite depressed prices, net sales increased by 10.8% on account rise in volumetric sales during FY17. Growth in sales volumes was a function of both marketing efforts and improved production capacity utilization. Moreover, year-on-year profit retention has also enhanced equity levels on a timeline basis. Accounting for current dynamics of the industry, STL plans to implement forward expansion given the growth potential in the value-added segment; this is expected to provide room for revenue diversification. Development in this regard will be monitored.

Liquidity profile of the company is considered satisfactory in view of adequate cash flows in relation to outstanding obligations. Moreover, aging of trade debts remains within manageable levels. Liquidity buffer in terms of liquid assets carried on balance sheet are limited while level of short term borrowings utilized, in relation to stock-in-trade and stores carried on the balance sheet, are considered reasonable. Moreover, leverage indicators continue to remain within prudent limits. Ability to maintain leverage, liquidity indicators and operational efficiencies along with sector dynamics will be key rating determinants over the rating horizon.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited