VIS Assigns Initial Entity Ratings to Siara Textile Mills (Private) Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- November 10, 2022 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of 'BBB/A-2' (Triple B/A-Two) to Siara Textile Mills (Pvt.) Limited (STML). The medium to long-term rating of 'BBB' denotes adequate credit quality coupled with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in the economy. The short-term rating of 'A-2' denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is 'Stable'.

STML is a small-sized spinning unit, with shareholding vested with the sponsoring family who is actively involved in day-to-day operations of the company. The assigned ratings factor in cyclicality and competitive intensity for spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, rising interest rates, inflationary pressures, and higher electricity costs pose risks on the sector over the medium term. Ratings are constrained by current weak macroeconomic environment globally and locally.

Hence, meeting projected growth targets and maintaining financial risk profile will be important for ratings. The ratings draw comfort from growth in scale of operations, improvement in profitability...