VIS Assigns ‘A1’ Rating to Al Karam Textile’s Short Term Sukuk

Karachi: VIS Credit Rating Company Limited has assigned an ‘A1’ short-term rating to the Short Term Sukuk issued by Al Karam Textile Mills (Private) Limited. The rating indicates a strong likelihood of timely repayment of the company’s short-term obligations, backed by solid liquidity factors.

The entity ratings for Al Karam Textile Mills stand at ‘A/A2’, with a stable outlook. The previous rating action was announced in August 2024.

Al Karam Textile Mills is a vertically integrated textile enterprise with nearly four decades of operational history. The company’s product line includes a range of yarns, fabrics, home and institutional textiles, and garments. Alkaram Studio, the company’s retail arm established in 2010, has become a significant local brand with 62 outlets nationwide.

The company issued a short-term, secured Sukuk amounting to Rs. 4 billion, including a Green Shoe Option of Rs. 1 billion, on October 15, 2024. The proceeds are intended for working capital needs at its newly established Nooriabad spinning plant. The Sukuk has a tenor of up to six months, with profit payable at the time of redemption at an interest rate of 6M Kibor plus 1.00%.

VIS assigned the rating based on the proposed security structure, which includes a lien over an IPS account holding government securities and the maintenance of a Debt Payment Account.

In fiscal year 2024, the company experienced revenue growth due to a recovery in demand, although net margins were pressured by higher finance costs. In the second quarter of fiscal year 2025, revenues remained stable, with exports contributing significantly. However, rising energy costs stressed gross margins, and net margins continued to reflect high interest rates.

Looking forward, Al Karam Textile’s management expects an increase in exports and gradual improvements in gross and net margins, supported by renewable energy initiatives and a reduction in interest rates.