The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Initial Rating to Diamond Fabrics Limited

Rating Type Entity
(15-Jul-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

The ratings of Diamond Fabrics Limited reflect the Company’s strong business profile emanating from its presence in the broader value chain in the international market; enabling the Company to fare better against volatility. The Company has a presence with four divisions (i) Spinning, (ii) Weaving iii) Denim iv) Apparel. In the last few years, the topline recorded growth where the mix largely remained tilted towards exports. During FY21, Company’s margins exhibited attrition while the net probability recorded an uptick. Other income supplemented the overall profitability of the company. Further, the expansion in the operations also includes backward and upward integration. Coverage witnessed recent improvement though the leverage is high. Ratings further incorporate the association of the Company with the well-established Sapphire Group which enjoys a distinguishing presence in several sectors. Sponsor's support, in case of need, will be available. During 9MFY22 (Jul21-Mar22), Pakistan textile exports surged to $14.2bln (recording a growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to an increase in demand for textile products and channeling export orders toward the Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth. Going forward, the textile sector’s outlook is expected to stay good in the medium term where demand for textile products is expected to sustain.
The ratings are dependent on sustaining the business profile of the Company by maintaining profitability and margins achieved from core textile operations. Sustainability of non-core income and prudent management of surplus funds will be ratings critical.

About the Entity
Diamond Fabric Limited – a public, unlisted entity – commenced operations in 1988 and is engaged in the manufacturing of value-added textile products. The Company has made separate business units for its business which include (i) Spinning, (ii) Weaving iii) Denim iv) Apparel. Diamond Fabric Limited is majorly owned by Sapphire Holding Limited (38.28%), SFL (30.69%) and the remaining shareholding is divided among different family members of Sapphire. Overall control vests with a seven-member Board of Directors, dominated by the sponsoring family: five family members, including the CEO, and one non-executive. The CEO, Mr. Amer Abdullah, belonging to the sponsoring family, possesses expertise in textile and oversees the Company affairs. He is assisted by a professional and experienced management team

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.