Press Release

VIS Assigns Initial Entity Ratings to Sitara Textile Industries Limited
 

Karachi, October 2, 2020: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/A-Two) to Sitara Textile Industries Limited (STIL). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality coupled with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound and risk factors considered small. Outlook on the assigned ratings is ‘Stable’.

STIL is a small sized export-oriented processing unit; virtually wholly owned and managed by the sponsoring family. The sponsors have supported in the form of interest free loan payable at the discretion of the company. The ratings incorporate its presence in value-added textile segment and the management’s focus to increase operational efficiency through BMR. The company’s topline witnessed a muted growth over the last few years, with largely stagnant gross margins. Around four-fifth of the net revenues comprises exports sales, while local revenue mainly emanates from sales to Sitara Hamza Limited, a wholly owned subsidiary of STIL. Given modest growth in equity base due to limited profitability and increasing trend in trade payables, debt leverage indicators have remained on a higher side. However, gearing has trended downwards over the years. Further, debt service coverage is considered adequate given minimal long-term borrowings. The ratings are constrained by relatively small scale of operations, limited profitability and relatively high debt leverage. Keeping leverage indicators at acceptable levels while improving net margins are considered important for the assigned ratings.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO


Applicable rating criterion: 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 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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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