Bhanero Textile Mills’ Ratings Reaffirmed Amid Economic Challenges

Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Bhanero Textile Mills Limited at ‘A+/A1’. The ratings reflect strong credit quality and liquidity, with a stable outlook, amid economic pressures and industry challenges.

According to a statement by VIS Credit Rating Company Limited, the medium to long-term rating of ‘A+’ indicates good credit quality and adequate protection factors, though subject to potential economic fluctuations. The short-term rating of ‘A1’ signifies a strong likelihood of timely repayment of obligations with excellent liquidity. The company’s legacy in yarn production, particularly for denim exports, and its robust sponsor group strength continue to support its ratings.

The ratings also account for business risks arising from high-interest rates, inflation, volatile raw material prices, and ongoing energy challenges in the country. These factors, along with the sensitivity of textile exports to the economic conditions of major markets such as the USA, UK, EU, and China, present challenges for margin sustainability and growth in the medium term.

The financial assessment reflects robust export growth, comprising over 45% of total revenue, and strong revenue growth. However, margins were impacted in FY24 due to higher raw material and energy costs and high-interest rates. While the liquidity profile remains adequate, debt coverages were strained, though there was a noted improvement in capitalization indicators in 1QFY25. Management anticipates a rebound in the latter half of the fiscal year as raw material prices stabilize and a transition to renewable energy sources, coupled with falling interest rates, supports margins. Future ratings will depend on profitability improvements and successful recovery plan realization.

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