PACRA Maintains Entity Ratings of E-Vision Manufacturing Limited

The ratings reflect E-Vision Manufacturing Limited's ("the Company" or "E-Vision") adequate business profile and its well-established position in the regenerated polyester staple fiber (r-PSF) industry. The Company has established a niche in the textile sector by producing high-quality white, black, and green regenerated polyester staple fiber and polyester chips from post-consumer polyethylene terephthalate (PET) bottles. Currently, the global market is experiencing a rapid shift from virgin to r-PSF and according to management, various global environmental authorities are advocating for the use of r-PSF over virgin PSF due to its lower energy consumption during manufacturing, minimal depletion of natural resources, and approximately ~20% lower cost compared to virgin polyester fiber. Currently, the local industry contends with competition from new market entrants while also grappling with reduced demand from the textile sector. The country's total textile exports declined by 15% and were recorded at $16.5bln in FY23. However, during 10MFY24 ~24% volumetric increase in exports has been observed. Despite this surge, value-wise exports remained stagnant and stood at $13.7bln as compared to SPLY. In response, the company has prioritized initiatives focused on stabilization and long-term sustainability. As part of this strategy, the company is looking to expand its export presence within the Asia-Pacific region. The company's performance in CY23 was reflected by macroeconomic turbulence and operational challenges. These included high inflation, historically high policy rates, significant rupee depreciation, and subdued demand with stagnant sales prices. As a result, sales declined by ~27.8% YoY in CY23. This decrease primarily resulted from reduced exports to Turkey, attributable to margin compression, competition with Chinese players, and weaker overall market demand. However, margins and profitability improved in local sales as compared to the previous year due to a better pricing strategy. The company maintains an adequate financial risk profile, supported by adequate cash flows and coverages within an acceptable range. However, there was a significant increase in the working capital cycle. Capital structure is leveraged, with a significant portion of borrowings being short-term used for working capital management. Moving ahead, the Company's board has approved a strategic expansion plan requiring a total investment of PKR 250 million. This initiative is geared towards enhancing operational efficiencies, fulfilling approximately 25% of the energy needs, elevating product quality and standards, and broadening the Company's export portfolio. Financing for this expansion is intended to be sourced through debt and internal cashflows.
The ratings hinge on sustainable revenue growth and margin improvement. Moreover, it is essential to maintain a robust capital structure consistent with the financial projections. Looking ahead, improvements to the company's governance framework, control environment, and external audit function by engaging auditors which are included in SBP’s panel of auditors would be viewed positively.

About the Entity
E-Vision Manufacturing Limited is a public, unlisted entity incorporated in 2013. The Company is engaged in the manufacturing and regeneration of polyester staple fiber with a gross production capacity of 60 tons per day. The Company’s major shareholding (~60%) is held through an offshore investment Company, Marylebone Management Limited, incorporated in the British Virgin Islands and owned wholly by Mr. Salman Ganny and remaining (~40%) rests with Mr. Abdul Ghaffar (CEO).