December 04, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has assigned initial entity ratings to Island Textile Mills Limited at ‘BBB+’ for Long Term and ‘A2’ for Short Term, with a ‘Stable’ outlook forecast.
According to the press release issued by PACRA, the ratings of Island capture the working capital cycle of the company which is stretched due to increased inventory days, though in line with the peers. The financial risk profile of the company is characterized by well-furnished coverages, however, capital structure is relatively leveraged. Long association of experienced and professional management team adds comfort. Going forward, management is planning to merge all three textile entities in order to benefit from the economies of scale.
The ratings are dependent on sustaining business margins while maintaining financial risk at low level. Prudent management of short-term liquidity and leveraging moderation would be rating essential. Going forward, materialization of successful merger of all three textile entities would be significant to rating.
Island Textile Mills Limited – a public listed company, primarily engaged in the manufacturing and sale of different varieties of yarn is majorly owned by Tata family. Tata Group currently owns three textile mills i.e. Island, Salfi and Tata Textile Mills Limited.
