Al-Karam Textile’s profitability highly benefits from economies of scale: VIS

March 29, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A/A-2’ to Al-Karam Textile Mills (Private) Limited. Outlook on the assigned ratings is ‘Stable’.

The long term rating of ‘A’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound.

The assigned ratings take into account extensive experience of sponsors, established business profile and improving profitability of the company.

As per the management, the increase in net sales was function of increase in average selling price and growth in volumes. Around three fourth of the company’s sales are geared towards the export market and primarily constitute sales of home textiles to renowned international companies.

Furthermore, presence in the local market through established ‘Al Karam Studio’ provides comfort to the business risk profile. Focus on international sales has led to client concentration in sales; however, the same is partly mitigated due to long term association with the clients. Economies of scale as a result of volumetric growth have translated to improvement in profitability on timeline basis.