Lahore, August 24, 2021 (PPI-OT): The ratings reflect the small yet adequate business profile of Khas Textile Mills (Pvt.) Limited emanating from a relatively small revenue base and profitability. The Company manufactures various types of the cotton ring and open-end yarn. The Company is associated with Khas Group of Industries where the group has presence in diverse sectors; including textile, aluminium, poultry, socks, and knitwear and import of building hardware. The Company’s sales volume increased due to increase in local sales from last year and better yarn prices. The sales value, in 9MFY21, has improved from FY20 – attributable to positive textile industry dynamics. Margins recorded uptick due to better yarn prices.
The financial risk profile witnessed improvement since last year due to decline in leveraging and slight improvement in coverage. The debt structure is skewed towards short-term borrowings. The Company’s room to borrow improved due to repayment of short-term loans. In addition to long and short-term borrowings, the Company took a loan from its directors worth PKR 1.1bln – a portion of which is intended to be retained as part of equity in the coming years. Going forward, the company intends to enhance the production capacities in coming years. The stretched working capital cycle and overall governance framework needs improvement.
Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20 due to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase. The probability of little attrition in demand remains on the horizon attributable to the outbreak of COVID-19 variants.
The ratings are dependent upon the management’s ability to improve margins, profitability and financial profile of the Company. Meanwhile, strengthening of governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will have a negative impact on ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com
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