Karachi: VIS Credit Rating Company Limited (VIS) has assigned a final rating of ‘A’ to the Medium Term Sukuk (MTS) issued by Al-Karam Textile Mills (Private) Limited (AKTM), affirming good credit quality with a stable outlook and a financial close of Rs. 2.2 billion on August 15, 2024.

According to VIS Credit Rating Company Limited, this final rating follows a preliminary rating issued on April 04, 2024, reflecting AKTM’s consistent financial strength and adequate protection factors amidst varying economic conditions. The Sukuk, with a tenure of three years, is secured against a mortgage over property and will support working capital needs for AKTM’s new spinning plant in Nooriabad.

AKTM, a part of the Al-Karam Group, has nearly four decades of operational history in the textile industry, offering a diverse product range that includes yarns, fabrics, home textiles, and garments. Its retail arm, Alkaram Studio, operates 62 outlets across Pakistan and has grown into a notable local brand since its inception in 2010.

The proceeds from the Sukuk issuance will primarily address the capital requirements of AKTM’s Nooriabad plant. The instrument, priced at 3M KIBOR + 1.50%, has its first redemption set for three months post the initial drawdown, aligning with the company’s strategic financial planning.

Financial assessments indicate that AKTM has experienced revenue growth due to a recovery in demand and an increased share of local sales in FY24. While gross margins have remained stable, net margins have faced pressures; however, they are anticipated to improve with expected declines in interest rates. The company also maintains solid liquidity and cash flow indicators, ensuring adequate debt service coverage.

This rating and Sukuk issuance mark significant steps for AKTM in bolstering its financial structure and supporting its expansion efforts, contributing positively to its long-term strategic objectives.