Karachi, December 31, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to Bhimra Textile Mills Limited (BLTL). 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 coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’.

BTML is a spinning company with main shareholding vested with the sponsoring family. The assigned ratings factor in high cyclicality and competitive intensity for spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile. On the other hand, holistically business risk profile of the textile industry is supported by stable and growing demand. Ratings also incorporate financial risk profile marked by improvement in margins and profitability indicators, sound liquidity and sizable debt service coverages. Further, owing to reduction in benchmark rates, a trend which has now reversed, the financing cost for the company had reduced, reflecting positively on the bottom line in the outgoing period.

However, the ratings remain sensitive to lack of revenue diversification and limited scale of operations. The management’s focus on expanding current operations with addition of 16,800 spindles bodes well for the company in terms of reaping economies of scale. Going forward, sales are expected to escalate on account of adequate orders in pipeline along with expansion of scale of operations.

On the other hand, leverage indicators have increased on account of higher borrowings to fund capital expenditure and increasing working capital requirements. The capitalization plan of the expansion would need to be aligned with that existing capital structure and dovetailing of timely revenue from the same. The ratings are dependent on sustenance of margins, realization of projected targets, incremental cash flow generation from recent capital expenditure and maintenance of leverage indicators.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/