Karachi, September 28, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of Arshad Corporation (Pvt.) Limited (ACL) from ‘BBB+’ (Triple B Plus) to ‘A-’ (Single A Minus). The short-term rating has been maintained at ‘A-2’ (Single A-Two). Outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Previous rating action was announced on April 23, 2020.

ACL is an export-oriented composite textile unit and primarily operates four business segments, including grey fabric, processed fabric, made-ups and garments. The U.S. and Europe are primary target markets, which account for nearly three-fourth of total sales. Shareholding of the company is held by the sponsoring family, who have been in the industry since 1954. The ratings take into account growth in topline driven by higher volumetric sales and average selling prices. Debt service coverage has remained adequate. Debt leverage has improved slightly in FY21 on the back of higher equity base despite increase in borrowings and trade and other payables.

The management has embarked upon enhancing operational efficiencies, optimizing production capacities at the processing end and expanding production capacity of weaving segment to meet raw material demand through in-house production. Presence of the company in export-oriented textile sector with positive demand prospects, and support to the industry on the regulatory front also bodes well for ACL.

Expected growth in revenues and profitability along with improvement in leverage indicators on account of profit retention and planned equity injection are the key rating drivers. Meanwhile, the ratings remain sensitive to exposure to exchange rate fluctuations and strong competition from local and regional textile players. The ratings will remain dependent on gradual decrease in gearing and maintenance of adequate coverages.

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/