Press Release

VIS Assigns Initial Ratings to Sohail Textile Mills Limited
 

Karachi, December 13, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB-/A-2’ (Triple B Minus/A-Two) to Sohail Textile Mills Limited (SOT). The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned ratings is ‘Stable’.

SOT is a part of Ayesha Group, which is primarily involved in local yarn spinning industry. The company has a spinning unit where blended polyester-cotton (PC) and chief-value-cotton (CVC) yarn of counts ranging from 10/1 to 36/1 are made. Shareholding of the company is vested with the sponsoring families. The assigned ratings take into account extensive experience, spanning nearly half a century, of the sponsoring family, and established relations with customers. Customer concentration risk is considered manageable while risk of bad debts is low as the company makes major portion of sales on cash.

The ratings factor in sustained revenue and improvement in profit margins, led by marginal increase in production, and favorable yarn pricing. Given considerable decline in the country’s cotton produce this year, the company is planning to import nearly half of cotton required which would expose it to foreign exchange risk. Liquidity position of the company is underpinned by increasing cash flows generation, while current ratio has remained largely stable. The company’s capacity to meet its financial obligation is considered adequate. However, given relatively small equity base and presence of subordinated loan from the directors, the leverage indicators are relatively high, though some improvement was noted by end-FY19. The ratings are sensitive to any considerable change in profitability, debt service coverage and leverage indicators.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (201) or email at info@vis.com.pk

Javed Callea
Advisor

VIS Entity Rating Criteria Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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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 .

VIS Credit Rating Company Limited