Lahore, October 25, 2021 (PPI-OT):The rating upgrade incorporates Zahidjee Textile’s improved business and financial risk profile with a good corporate governance framework. The business risk profile is supported by the Company’s established track record of operating in spinning and weaving segments. Continuous BMR activities have led to significant growth in operations in recent years. The Company is adding 90,720 to its current capacity out of which 40,000 spindles CoD will be achieved in November 2021 while the loan approval of further 50,000 spindles is pending from the Bank. During FY21, the operating performance of the Company witnessed sizable improvement.
Escalated domestic demand and rising exports resulted in improved revenues. The demand for exports has surged after Dec’20 and the Company capitalized on it. The exports increased by PKR 3.4bln YoY to clock in at PKR 6.2bln which primarily consists of Indirect exports – Yarn of PKR 4.1bln. Moreover, the Company has ramped up the capacity utilization significantly from June’20 and the capacity utilization as of date, reaching above 99% and 82% in spinning and weaving segments respectively, give a comfortable picture, ahead. The Company’s financial risk profile remains strong, characterized by sufficient cash flows and, in turn, strong coverages, driven by augmented profitability.
Borrowing at concessionary SBP rates has also provided some respite in the COVID-19 pandemic period. Going forward, the Company aims to undertake further expansion into spinning, financed through a mix of internal and external sources. Ratings are also underpinned by a moderately low leveraged capital structure and growth in the equity base. Zahidjee Textile has a stable and experienced senior management team which is supported by clear reporting lines as per a formalized organogram and satisfactory monitoring process. The ratings are dependent on sustaining business margins as well as strong coverages and stability of financial matrix. Meanwhile, management of debt levels during upcoming capacity expansion is considered important.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com