March 05, 2019 (MLN): VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A/A-2’ (Single A/A-Two) to International Textile Limited (ITL). 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. Access to capital markets is good. Risk factors are small.
As per the rating agency, the assigned ratings take into sound internal control framework and satisfactory financial profile as indicated by consistency in gross margins, low leverage indicators and adequate debt repayment capacity in view of sizeable cash flows vis-à-vis outstanding obligations.
Despite consistent sales, gross margins have improved due to favorable cotton procurement strategy. Improvement in gross margins coupled with exchange gains has translated into higher net margins on a timeline basis.
Sustainability in margins and profitability in the given rating horizon would be an important rating determinant going forward.
Cash flows of the company have varied in line with the profitability of the company.
Overall liquidity profile of the company is considered adequate in view of sufficient cash flows in relation to outstanding obligations, satisfactory debt servicing ability and aging of trade debts which remain within manageable levels.
Equity base of the company has grown on timeline basis due to profit retention.
The company has acquired short term finance for working capital requirements and no long term debt is availed by the company.
With increase in total debt levels of the company, leverage indicators have trended upwards but continue to remain at manageable levels. Maintaining leverage indictors in line with projections is considered important from rating perspective.
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