Press Release

Ratings of Arshad Textile Mills Limited maintained with ‘Rating Watch-Negative’ status
 

Karachi, April 28, 2020: VIS Credit Rating Company Limited (VIS), while maintaining entity rating of ‘BB+’/A-3’ (Double B plus /A-Three) assigned to ‘Arshad Textile Mills Limited (ATML)’, has placed the same on ‘Rating Watch - Negative’ status. The medium to long-term rating of ‘BB+’ denotes that obligations deemed likely to be met. Protection factors are capable of weakening if changes occur in the economy. Overall quality may move up or down frequently within this category. The short-term rating of ‘A-3’ denotes timely payment of obligations coupled with satisfactory company fundamental and liquidity factors. The previous rating action was announced on April 03, 2019.

ATML is a small-scale spinning unit involved in the manufacturing and sale of cotton-blended yarn. ATML is a part of Arshad Group and shareholding is mainly vested with sponsoring family who are actively involved in the day-to-day operations of the company. ATML manufactures three blends of carded and combed yarn, including PC, CVC, and PV yarn with count rage of Ne 7/1 - Ne 40/1. ATML’s fabric trading division purchases grey fabric from weaving mills and obtains dyeing, finishing, and stitching services from sister concern. The company sells its home textile products under the brand name “Arasih” through an online store and men’s suiting fabric under the brand name ‘‘Shahsawar’’ to a network of retailers across Pakistan.

The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand and challenging economic environment. It is expected that the entire value chain of the textile industry will be effected by these developments. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch-Developing’ status. Considering the scale of spinning operations of the company and being on the lowest of textile chain, ratings are being placed on ‘Negative’ outlook. Nevertheless as scenario is evolving rapidly, VIS will closely monitor and will accordingly take action to resolve the outlook status. The ratings are dependent upon maintenance of overall sales, profit margin, debt service coverage and gearing ratios at an adequate level, with outlook subject to be reviewed once the situation stabilizes.

For further information on this rating announcement, please contact the undersigned at (021) 35311861-66 or mailto:info@vis.com.pk





Faryal Faheem Ahmed
Deputy CEO

Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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