VIS revises rating outlook of Nadeem Textile Mills from ‘Watch-Negative’ to ‘Stable’ owing to improved performance

November 16, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Nadeem Textile Mills Limited (NTML) at ‘BBB+/A-2’ (Triple B Plus/A-Two).

The Outlook on the ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’.

Long term rating of ‘BBB+’ reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short Term Rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are limited. Previous rating action was announced on April 24, 2020.

Nadeem Textile Mills Limited (NTML) is engaged in the manufacturing and sale of yarn business for more than three decades and operates via two spinning units located in Nooriabad and Kotri, Sindh.

The rating derives impetus from long-standing association of the sponsors with the textile industry. NTML’s topline is derived from three major sources i.e. domestic sales (48%), direct export sales (23%) and indirect export sales (30%). The company’s cash conversion cycle, and overall gearing & leveraging, as of Sep’20, have been reviewed and gauged to be aligned with parameters for the assigned rating.

The revision in rating outlook reflects improvement in performance of NTML, with topline in Q1’FY21 being 7% higher than SPLY, albeit the pressure on gross margin persists. Given Covid-19 relief measures, the financing cost for the company has also reduced, reflecting positively on the bottom line. Even though concerns of a 2nd wave of Covid-19 remain elevated, we expect the order book for the industry to remain strong in the ongoing year, easing our business risk concerns. The assigned ratings remain dependent on maintenance of liquidity & capitalization metrics in line with the threshold.

VIS