JCR-VIS Credit Rating Company Ltd (JCR-VIS) has placed the medium to long term entity rating of A- (Single A Minus) and short-term rating of A-2 (A Two) of Saif Textile Mills Limited on 'Rating Watch'. This action has been taken in view of the potential material change in the company's credit risk profile due to its significant expansion plans. However, since certain key agreements with regard to the proposed expansion are yet to be formalised, it is not possible to incorporate the exact impact in the rating assessment at present.
JCR-VIS will continue to monitor the developments in this regard and resolve the 'Rating Watch' status as soon as the final versions of the key agreements and the consequent financing plan are made available.
JCR-VIS has noted the successful installation of nearly 20,000 Reiter K44 spindles by December 2004 with capability of manufacturing compact yarn, thus enabling the company to venture into value-added segment to generate stronger margins.
The benefit of this expansion in both volumes and margins will be witnessed gradually in FY2005-06 with full years of operations. Also, the company's plan to set up a captive power generation unit will further boost margins of the company.