Tata textile Mills becomes a victim of China-USA trade war: PACRA

April 4, 2019: Pakistan Credit Rating Agency has assigned long-term rating of ‘A-’ and short-term rating of ‘A2’ to Tata Textile Milss Limited. The outlook assigned to the company is ‘stable’.

Spinning industry has recently suffered as lower demand for cotton yarn from China owing to trade war with USA has led to lower exports volume and margins. Consequently, Tata Textile's margins and, in turn, profitability have deteriorated.

The ratings of Tata Textile reflect the financial risk profile of the Company which is characterized by moderate leveraging, strong coverages despite high interest rates and adequate working capital management. 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 improving business margins while maintaining financial risk at low level. Prudent management of short-term liquidity and sustained coverages are important. Going forward, materialization of successful merger of all three textile entities would be rating essential.

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