Press Release

VIS Assigns Initial Entity Ratings of Rajby Industries

Karachi, November 29, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Rajby Industries (RI). 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. Outlook on the assigned ratings is ‘Stable’.

Rajby Industries (RI) belongs to the Rajby Group of Companies which has extensive experience in the textile sector (over 4 decades) and has been operating in the denim manufacturing business since 1988. The group operates through two different companies RI (involved in manufacturing of denim garments) and Rajby Textiles (Private) Limited (RTPL) (involved in manufacturing of denim fabric and is also setting up a spinning unit which will make the operations of the group vertically integrated). RI offers one-stop solution offering cutting, stitching, washing, finishing, quality control to clearance and delivery of denim apparels through a number of production facilities. The company has also installed solar panels at the head office and at a selected production facility in line with its vision of using clean and green energy which is planned to continue. Existing capacity utilization of the plant is on the higher side. Going forward, continuous expansion in installed capacity is planned over the rating horizon. Capacity expansion will be undertaken in 3 phases and will be funded through a mix of debt and equity.

Assigned ratings take into account RI’s improving financial & moderate business risk profile and reputed client base. However, ratings are constrained on account of firm’s registered status of a partnership concern, room for improvement in corporate governance framework and low equity base in comparison to peers. Business risk profile of the denim industry is supported by stable and growing demand for denim products. Given the favorable policies & incentives of the government on enhancing exports and imposition of duties on Chinese exports to USA, there is significant opportunity for denim players to enhance exports. However, local and international expansion by major players is expected to keep pricing power and hence margins in check. Moreover, significant investment required by customers as part of sustainability initiative is expected to add to cost pressures for denim manufacturers. Ratings remain dependent on RI achieving projected increase in capitalization levels and management’s commitment to strive to change the status of the Company to a private limited company over the rating horizon.

Assessment of financial risk profile incorporates improving profitability, satisfactory liquidity profile and adequate capitalization levels. Healthy order pipeline along with continued focus on value addition is expected to translate into continued sales growth while management expects to sustain margins on the back of increase in selling prices despite increase in input cost. Liquidity profile of the company is considered satisfactory in view of healthy cash flow coverage of outstanding obligations. Leverage indicators increased during FY19 on account of debt drawdown for expansion and to finance working capital requirements. Going forward, with limited debt drawdown and expected increase in equity base, leverage indicators are projected to improve. The assigned ratings remain dependent on maintaining projected financial indicators within benchmarks for the assigned ratings.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 207) at 021-35311861-66 or email at

Jamal Abbas Zaidi

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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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