Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the credit ratings of Akhtar Textile Industries (Private) Limited (ATIL) at 'A/A-2', reflecting the company’s good credit quality and stable financial outlook despite the challenging textile sector environment. This rating affirmation comes amidst ATIL's ongoing expansion with the installation of a new denim unit expected to be operational by FY25.
According to VIS Credit Rating Company Limited, the stable ratings assigned to ATIL underscore its established market position within the textile industry, particularly in the export of denim products. With nearly four decades of operational history and part of the diverse Akhtar Group of Companies, ATIL continues to show robust operational capabilities and sound financial management. The company’s primary facilities, including its head office and manufacturing units, are strategically located in Karachi, facilitating its export operations.
The assigned ratings reflect both the opportunities and risks associated with the textile sector in Pakistan, which is subject to economic cyclicality and intense global competition. The industry is particularly vulnerable to shifts in global economic conditions, geopolitical tensions, and local supply chain disruptions, notably in cotton availability and price volatility due to reliance on imported raw materials.
Financially, ATIL has demonstrated strong revenue growth in FY23, largely driven by the depreciation of the rupee, which enhanced export competitiveness. While gross margins improved, net margins were pressured by rising operational and financial costs. The first half of FY24 saw further revenue growth due to increased selling prices and a modest rise in sales volume, though profitability metrics were impacted by heightened manufacturing and financing expenses.
The company maintains a manageable financial risk profile with adequate liquidity indicators. The Debt Service Coverage Ratio (DSCR) and current ratios have shown marginal improvement, although challenges remain in terms of increased gearing and slightly weakened leverage due to strained cash flows. As ATIL progresses with its expansion plans, it aims to finance its new denim unit through internally generated cash flows or potentially through subsidized industrial loans, which are critical for sustaining its growth trajectory and maintaining its credit ratings.
VIS notes that future improvements in ATIL’s profitability and capitalization metrics will be pivotal in maintaining or enhancing its current ratings.