Karachi: VIS Credit Rating Company Limited (VIS) has assigned a preliminary rating of ‘A-1’ to the proposed Short Term Sukuk (STS) of Al Karam Textile Mills (Private) Limited (AKTM), indicating a strong likelihood of timely repayment given the company’s solid liquidity factors.

According to VIS Credit Rating Company Limited, the ‘A-1’ rating reflects AKTM’s robust operational history and its strategic financial management. The textile company, which boasts nearly four decades of industry presence, is set to issue a short-term, secured Sukuk totaling Rs. 4 billion, with an additional Green Shoe Option of Rs. 1.0 billion. This issuance is aimed at supporting working capital needs for AKTM’s newly established spinning plant in Nooriabad.

AKTM’s extensive product portfolio includes a variety of yarns, fabrics, home textiles, and garments, and it operates Alkaram Studio, a significant retail brand with 62 outlets nationwide. The planned Sukuk will have a tenor of up to six months, with profits payable upon redemption at a rate of the 6-month KIBOR plus 1%.

The assigned rating also considers the proposed security structure of the Sukuk, which includes 40% liquid asset coverage and a Debt Payment Account (DPA), enhancing the security’s attractiveness to investors. VIS notes that AKTM has demonstrated revenue growth fueled by a recovery in demand and an increased proportion of local sales in FY24. While gross margins have remained stable, net margins faced some pressure but are anticipated to recover with expected declines in interest rates. The company’s liquidity and cash flow indicators have also been reported as stable, with adequate debt service coverage ratios.

This rating not only underscores AKTM’s financial health but also signals confidence in its ability to meet short-term obligations and support sustained operational growth.