Karachi, December 31, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Naveena Industries Limited to ‘A-/A-2’ (Single A Minus/A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the assigned ratings is ‘Stable’. Long-Term Rating of A- reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-Term Rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on November 20, 2020.
The principal business of Naveena Industries Limited (NIL) includes manufacturing and export of grey cloth. Production facilities of the company are located in Karachi and Rahim Yar Khan. Exports constitute around four fifth of the total sales of the company. Ratings incorporate the BMR project yielding higher production capacity by Jan-Feb’22. Upward revision in rating reflects projected increase in revenue and projected higher margins led by BMR expansion.
Revenue growth has been a function of volumetric growth, with proportion of export sales reducing to 76% (FY20: 81%) in FY21. Risk of geographic concentration in Europe and USA is considered manageable, however, client wise concentration has remained on the higher side. With projected increase in capacity, the company plans to diversify in new countries, in the medium term. Higher profit margins in the outgoing year were supported by lower finance cost along with one-off income generated from the disposal of machinery and one-off gain on sale of long-term investment.
With rising interest rates and elevated debt levels, higher finance costs are projected to remain a drag on overall profitability. Given elevated debt levels at end-Sep’21, cash flow coverages against outstanding obligations reduced; however the same remain sufficient. Ratings remain dependent on maintaining projected liquidity levels, going forward. Given BMR and expansion plans on board, capitalization indicators of the company have increased at end-Sep’21. Improvement in the same through projected increase in equity base led by profit retention is considered important from a ratings perspective. Ratings remain dependent on meeting projected financial indicators over the next two and a half years, which would be monitored by VIS.
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/