Press Release

JCR-VIS Assigns Initial Entity Ratings to Zaman Textile Mills (Pvt.) Limited

Karachi, November 22, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Zaman Textile Mills (Pvt.) Limited (ZTML). Outlook on the assigned ratings is ‘Stable’.

Zaman Textile Mills Limited (ZTML) was incorporated as a public limited company in 1969. The company changed its status to a private company in May 2016. The company is primarily engaged in manufacturing, processing and sale of yarn and fabric. The company’s yarn manufacturing facility is located at Kotri Industrial Estate, near Hyderabad; whereas the fabric production facility is based in Landhi Industrial Area, Karachi.

The assigned ratings take into account extensive experience of sponsors in the textile sector, improving profitability, sound capitalization and adequate debt servicing capability of the company. Ratings are constrained by increasing leverage indicators and current corporate governance framework which depicts room for improvement.

During the last three years, profitability of the company has trended upwards on account of growth in top-line of the company. Increase in average selling prices and volumetric growth have both contributed to higher sales of the company. In line with growth in sales, gross profit has also increased on timeline basis; however, gross margins witnessed a dip in FY18 due to increase in the prices of cotton, a key raw material in the production of yarn and fabric. As per management, capacity expansion is expected to favorably impact the quantum of sales and overall profitability indicators going forward.

Liquidity profile of the company is considered adequate in view of sufficient cash flows in relation to outstanding obligations. Stock in trade and trade debts are more than sufficient to cover short-term borrowings, while the current ratio also remains above 1.0x. Owing to profit retention, equity base has increased on timeline basis. Furthermore, equity base of the company is supported by sizeable interest free loan from sponsors. Despite growth in equity base, the leverage indicators have trended upwards due to additional borrowings to fund capacity expansion and are expected to further increase going forward. Ratings are dependent on maintenance of the leverage indicators within manageable levels.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Narendar Shankar Lal (Ext: 203) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited