VIS Reaffirms Entity Ratings of Shahtaj Textile Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- November 23, 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 reaffirmed entity ratings of Shahtaj Textile Limited (STL) at 'A-/A-2' (Single A Minus/A-Two). Outlook on the assigned ratings is 'Stable'. Previous rating action was announced on January 14, 2022.

Ratings reaffirmation are underpinned by sound sponsor strength and more than two-decade operating track record in the weaving industry. The group has over six decades of experience and a cumulative annual turnover of ~Rs. 30b according to management. Ratings take note of strong growth in sales revenue, while a significant increase in power costs impacted margins during the current fiscal year. However, cash flow generation is in excess of outstanding debt repayments, thereby liquidity profile remains sound. Leverage indicators have trended upwards on account of increase in debt levels.

During the review period, 49 existing looms were replaced at a total capex of Rs. 500m, with the entire cost financed by TERF facility; all looms are currently operational. The same resulted in an increase in plant capacity, with an additional 5% to 6% increase expected given full year impact. Utilization levels have largely remained consistent with previous years. The company uses order-based production, and orders are fully booked until mid-December, as per management.

While crossing the Rs. 7b mark in FY22, topline registered a sizeable growth of ~51% (FY21: ~13%) primarily driven by increase in fabric prices, while volumetric growth remained nominal. On average, sales have been...