KARACHI:VIS Credit Rating Company Limited has assigned initial entity ratings of single A minus/A-two) to The Crescent Textile Mills Limited. The medium to long-term rating of ‘A-’ signifies good credit quality with strong protection factors.
Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is stable.
The ratings assigned to Crestex take into account the company being the flagship company of Crescent Group. The ratings incorporate diversification of revenue stream into spinning, weaving and made-up segments; however, the reliance on spinning still remains significant. Therefore, ratings factor in high criticality and competitive intensity for spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile.
On the other hand, holistically business risk profile of the textile industry is supported by stable and growing demand prospects. Based upon projected capex in the next two fiscal years, the company has planned to reduce its reliance on procurement of fabric from open market on account of capacity enhancement of both weaving and stitching divisions. The ratings incorporate impact of currency fluctuations on imported raw material and any adverse changes in regulatory duties.