AsiaNet-Pakistan Premier Editorial Content and Press Release Distribution Service
Lahore, October 30, 2019 (PPI-OT): The ratings reflect adequate business profile of Basfa Textile (Pvt) Ltd. The Company is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn. The Company has over the years successfully created its niche market in viscose yarn. Building on these benefits, the management fully shifted to viscose yarn in FY19. The Company being importer of viscose, remains exposed to exchange rate risk. However, the Company was able to pass on impact of exchange rate to its customers to an extent.
Since July 2019, withdrawal of zero rating status has impacted the Company as majority of its customers were unregistered. This led to pressure on topline as the Company was not able to make significant sales. Consequently, the management has decided to restart manufacturing of cotton yarn to diversify the risk. The Company has an adequate financial profile characterized by moderate leveraging and good coverages. The Company has largely cash based sales model, which requires less working capital financing. As a result, the Company has a positive room to borrow at net trade assets level depicting adequate ability to borrow, if need arises.
The ratings are dependent on sustaining volumes and margins while maintaining financial risk at low level. Governance framework and financial transparency needs improvement. At the same time, prudent management of short-term liquidity is considered important. Any substantial dip in revenues and/or margins post withdrawal of zero rated duty will have 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: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com