Karachi, December 23, 2021 (PPI-OT):VIS Credit Rating Company Limited has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/Single A-Two) to Orient Textile Mills Limited (OTML). Long term rating of ‘BBB’ denotes adequate credit quality; reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ reflects good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
OTML, incorporated in 1986 is one of the two textile companies owned by Ebrahim Group of Companies and is headquartered in Karachi. The group also owns business interests in Dairy Products and Beverage Industry. The company mainly focuses weaving of greige cloth and sale of home textile products, such as sofa cloths, curtains, bedsheets, and comforters. In addition, it offers weaving services to local clients. On average basis, capacity utilization of the company continues to remain on the higher side.
Assigned ratings takes into account extensive experience of sponsors, growth in revenues on a timeline basis, and adequate debt servicing. Ratings are constrained by declining margins, high leverage indicators and adequate liquidity profile of the company.
Ratings incorporate consistent growth in sales revenue led by both higher volumes and greater average selling prices due to local currency devaluation. Proportion of exports sales in the total sales mix has been increasing over the past two years. Geographic concentration is considered manageable, while, client wise concentration is on the higher side, however, ratings draw comfort from long-term relationships with major clients.
Ratings are constrained on account of declining trend in margins which despite increase in revenues has not resulted in higher cash flows. In addition, leverage indicators have surged on a timeline basis due to elevated debt levels to finance working capital needs and BMR expansion. Cash flow coverages consequently have reduced over the past two years. Liquidity profile is considered adequate. Going forward, improvement in capitalization indicators along with achievement of higher projected profitability will be important for ratings.
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/