Karachi: VIS Credit Rating Company Limited has downgraded the entity ratings of Sitara Textile Industries Limited (STIL) from ‘BBB+/A-2’ to ‘BB+/A-3’. The revision reflects concerns over the company’s ability to meet its financial obligations, particularly in light of the ongoing challenges posed by a weak macroeconomic environment, rising operational costs, and reduced demand for its products.

According to VIS Credit Rating Company Limited, the medium to long-term ‘BB+’ rating indicates obligations that are likely to be met but are subject to weakening in the event of economic changes. The short-term ‘A-3’ rating denotes a fair likelihood of timely repayment of short-term debt obligations. The outlook on STIL’s ratings has been revised to ‘Rating Watch – Negative,’ signaling continued uncertainty in the company’s financial stability.

STIL, a key player in the home textiles market for over 30 years, is facing significant operational strain, with only 100 out of 300 stitching machines currently functional due to the shutdown of its primary processing plant. The company, which is part of the Mian Anees Group, is dealing with a total debt of Rs. 1.6 billion, down from Rs. 2.0 billion at the end of FY23. Despite the reduction, the company remains under financial pressure, with overdue obligations within the 90-day period. Plans are underway to address the debt through asset liquidation and the establishment of a smaller textile unit at a new location.

STIL’s topline has declined during FY23 and 9MFY24 due to reduced demand and limited operational activity, though gross margins have shown improvement. Going forward, the company’s ability to repay debt, secure sponsor support, and commence operations at the new unit will be critical factors influencing its credit ratings.