VIS Upgrades Entity Rating of Z.A. Corporation (Private) Limited

Karachi, February 26, 2021 (PPI-OT): VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of Z.A. Corporation (Pvt.) Limited (ZAC) from ‘BBB’ (Triple B) to ‘BBB+’ (Triple B Plus). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned rating has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Previous ratings action was announced on April 28, 2020.

ZAC is a medium-sized spinning unit located in Faisalabad. Shareholding of the company is vested with Sheikh Danish Ali who is actively involved in day to day affairs of the company. The assigned ratings take into account growth in revenue and profits which are being driven mainly by enhanced volumes, an outcome of phase-wise capacity expansion of the company.

Product portfolio comprises viscose and cotton yarn. Unregistered persons account for majority sales; the company manages the counterparty risk with sales on cash/advance basis. The ratings draw comfort from favourable dynamics of textile sector and further capacity expansion during FY22 while maintaining the leverage indicators around current levels.

While cash flows generation remained adequate, coverages have witnessed a decreasing trend which needs to be arrested. Leverage indicators, though increased by end-HY21 due to capex and higher working capital requirements, have remained manageable. However, the ratings are constrained by vulnerability of the spinning sector to availability and prices of raw materials, foreign exchange risk as ZAC is heavily dependent on imported viscose, and any adverse changes in the regulatory duties structure.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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