PACRA Maintains Entity Ratings of Allawasaya Textile and Finishing Mills Limited

The rating reflects the adequate presence of Allawasaya Textile and Finishing Mills Limited (“the Company” or “AWTX”) in textile industry of Pakistan. The principal activity of the Company is the manufacturing and sale of yarn with an operating capacity of 46,488 spindles. The three companies primarily operate under the umbrella of Allawasaya group which includes Allawasaya Spinning Mills (Pvt) Limited, Allawasaya Textile and Finishing Mills Limited and Shah Shams Cotton Industries (Pvt) Limited reflects adequate financial strength. The board is dominated by the sponsoring family and acts more in an execution role as they possess considerable industry-specific exposure. The management structure of the Company reflects adequate delegation of authority matrix. The product slate of the Company includes PC(Polyester Cotton) Yarn, PV (Polyester Viscose) yarn and CVC (Chief Value of Cotton) Yarn with an average yarn count of 29s. During FY23, the Company’s profitability matrix and business fundamentals are under stress due to a dip in local and international yarn demand coupled with escalated energy tariffs. This resulted in net losses incurred in FY23. However, slight improvement is observed in the company’s performance during 1HFY24 owing to raw material procurement efficiency. The financial risk profile of the Company is adequate considering the leveraged capital structure and slightly stretched working capital management depicting industry norms. The cashflows and coverages of the Company are considered adequate and needs improvement. The company’s performance will be observed in the upcoming quarters with prime focus on converting operational efficiency into internally generated sufficient cashflows to supplement the core business operations. The spinning industry is highly fragmented and consists of ~368 dedicated spinning units with an estimated size of PKR 775bln and 13.4mln number of spindles installed as of FY23 according to an economic survey of Pakistan. The projected cotton production estimate is revised and projected to be 11.5mln bales and currently, production reached up to ~8.26mln bales surpassing FY23 total production of 4.91mln bales. During FY24 better local raw cotton yield is expected to supplement the Companies for import substitution. Pakistan's requirement for imported cotton stands at 3.5 million bales to 4 million bales this year. The recent elevation of energy tariffs and the availability of locally procured raw cotton are the prime challenges specific to the industry.
The ratings are dependent upon the Company’s ability to improve its performance in terms of business fundamentals sustainability a devise strategy to manage inflated energy costs in the future. The maintenance of capacity utilization at an optimal level while generating sufficient cashflows and coverages remains critical for the ratings. The adherence to the debt matrix at an adequate level is a prerequisite for an assigned rating.

About the Entity
Allawasaya Textile and Finishing Mills Limited (the Company), is a listed company engaged in the manufacturing and sale of different varieties of yarn. 98.5% of the Company’s shareholding is distributed among family members of Mian Jamil, Mian Idrees and Mian Tauqir Overall control vests in an eleven-member board of directors. The CEO – Mr. Alamgir Jamil carries extensive experience in the textile industry and is supported by an experienced management team.