Karachi, March 30, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A-1’ (Single A Minus/A-One) to Blessed Textiles Limited (BTL). Outlook on the assigned ratings is ‘Stable’. BTL is part of portfolio of Umer Group of Companies, which has been operational in textile sector for 35 years. BTL is a textile composite engaged in manufacturing of both yarn and fabric to cater to local and export demand. The company has two spinning units and one weaving unit based in Ferozewatan, Sheikhupura. Both spinning units are engaged in production of coarse to fine yarn, while the weaving unit manufactures greige cloth.
Assigned ratings reflect adequate financial risk profile of the company as indicated by satisfactory capitalization and liquidity indicators and improving profitability. Extensive experience and sound track record of sponsors is also incorporated in ratings. Ratings also take into account moderate business risk profile due to volatility in cotton prices and currency exchange rates.
Profitability of BTL depicted improvement in FY17 and Q1’18 primarily on the back of higher gross margins. Gross margins have increased mainly on account of recovery in yarn prices. Furthermore, improvement in gross margins was also a function of growth in volumes in Q1’18 due to addition of spindles in late FY17. Going forward, profitability of BTL is expected to improve due to recent rupee depreciation. Moreover, renewal of GSP plus status and incentives given under the textile package are expected to aid growth in export sales.
Liquidity profile of the company is considered adequate in view of satisfactory cash flows in relation to outstanding obligations. Equity base of the company has grown considerably on account of profit retention. Gearing and debt leverage have increased in the period FY15-FY17 owing to acquisition of long term debt to facilitate capacity expansion.
The same improved in Q1’18 as result of repayment of short term debt. Short term borrowings are acquired as per seasonal procurement requirements and, resultantly, vary throughout the year. Given that management plans to undertake limited capacity expansion through acquisition of additional debt, gearing and debt leverage are expected to increase going forward. However, the same are projected to remain within manageable levels.
For more information, contact:
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi