VIS Revises Entity Ratings of Ana and Batla Industries (Private) Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- May 18, 2023 (PPI-OT)

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

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VIS Credit Rating Company Ltd. (VIS) has downgraded the entity ratings of Ana and Batla Industries (Private) Limited (ABI) to 'BBB/A-2' from 'BBB+/A-2'. The long-term rating of 'BBB' reflects adequate credit quality. Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of 'A-2' indicates good certainty of timely payment, liquidity factors and company fundamentals are sound. Access to capital is good. Risk factors are small. The outlook for the assigned ratings is 'Stable'. The previous rating action was announced on February 7th, 2022.

Assigned ratings take into account ABI's moderate business risk profile. The long-term demand outlook for baby diapers, which is the major segment in which ABI operates, is supported by Pakistan's large population, increasing birth rates, and growing consumer understanding of the benefits of hygienic products for babies. The Company has rapidly expanded its output over the years and has introduced various brands of the same product catering to different target markets, enabling the Company to compete with established multinational brands. Additionally, management has established and sustained the business' presence across all regions of Pakistan.

Revision in ratings takes into account margin deterioration and weakening in liquidity profile together with import constraints and increased currency risk. Ratings also reflect rising inflationary pressures and their impact on demand. Top line growth was recorded in FY22, however, it fell short of projections. Margin deterioration was recorded on account of weakening of purchasing power of consumers and a shift towards lower-margin products resulting from significant devaluation of the PKR against the USD. Additionally, the...