Basfa Textile (Pvt.) Limited (“BTPL” or “the Company”), incorporated in 2006, commenced commercial operations in 2008. The Company operates as a privately held limited liability entity, with its corporate head office located at 20-KM Ferozepur Road, Lahore.

BTPL was founded by Mr. Jahangir Saleem, who previously operated in the automotive coatings and chemical resins segment through Basfa Industries (Pvt.) Limited and Auto Coatings (Pvt.) Limited. Leveraging his industrial experience, the sponsor diversified into the textile spinning sector, establishing BTPL as a dedicated yarn manufacturing enterprise.The Company’s name, “BASFA”, is derived from the initials of the sponsor’s four sons, Mr. Babar Jahangir, Mr. Sajid Jahangir, Mr. Fahad Jahangir, and Mr. Ahmad Jahangir, reflecting the family-owned and operated nature of the business and the long-term generational orientation embedded within the ownership structure.

The Company is principally engaged in the manufacturing and sale of viscose and cotton yarn, operating with a total installed capacity of 60,156 spindles. The product portfolio comprises viscose yarn marketed under the brand “Super-Diamond” and cotton yarn marketed under the brand “Super-Gold.” Operations are geographically diversified across two production facilities:

Unit 1: Located at 36-KM Ferozepur Road, Lahore, with an installed capacity of 38,136 spindles.

Unit 2: Situated at Feroz Watwan Road, Chandi Kot Stop, Sheikhupura, with an installed capacity of 22,020 spindles.

During the review period, the Company continued to optimize its product mix toward finer yarn counts, in line with its strategy to enhance margin sustainability and cater to higher-value downstream segments. Concurrently, the Company undertook material investments in renewable energy, significantly strengthening operational resilience and cost efficiency.

BTPL is entirely owned by the Jahangir Saleem family, maintaining 100% sponsor control. The shareholding structure is as follows:

Mr. Babar Jahangir (Chairman / CEO): 44.40%

Mr. Ahmad Jahangir: 30.00%

Mr. Fahad Jahangir: 25.60%

The ownership structure reflects complete sponsor alignment, enabling swift strategic execution, centralized oversight, and long-term business continuity.

The ownership profile is considered strong and stable, underpinned by documented succession planning and progressive intergenerational transition. The sponsor, Mr. Jahangir Saleem, has proactively distributed ownership among his sons, ensuring clarity in leadership succession, continuity of strategic vision, and organizational stability. This structured transition significantly mitigates key-man risk and enhances long-term business sustainability.

The sponsors possess diversified industrial experience, spanning automotive coatings, chemical resins, and textile spinning. Mr. Babar Jahangir brings over 19 years of operational and managerial experience, complemented by strong technical orientation and process optimization capabilities. His hands-on leadership style and technological inclination have enabled the Company to successfully modernize its production profile, improve energy efficiency, and optimize operational controls, thereby strengthening competitive positioning within a highly cost-sensitive industry.

As a single-line business, BTPL inherently carries business concentration risk; however, this is partially mitigated by the sponsors’ demonstrated financial capacity, commitment, and historical support, particularly during cyclical downturns and investment phases. The sponsors’ ability to inject liquidity, absorb earnings volatility, and fund capital investments internally underpins the Company’s adequate financial strength and balance sheet resilience.

The Board of Directors (“BoD”) comprises three executive members, led by Mr. Babar Jahangir (Chairman & CEO), alongside Mr. Ahmad Jahangir and Mr. Fahad Jahangir, both serving as Directors. The board structure reflects complete sponsor representation, enabling swift decision-making, strong strategic alignment, and execution efficiency. However, the absence of independent representation constrains board-level objectivity, governance depth, and institutional oversight. The inclusion of independent directors with relevant sectoral, financial, or governance expertise would meaningfully strengthen board effectiveness, policy oversight, and risk governance, particularly as the Company continues to scale operations and complexity.

Mr. Babar Jahangir holds a UK-based graduate qualification and has been associated with BTPL for over eighteen years, leading the Company through its capacity expansion, product diversification, and operational transformation phases. His long-standing involvement ensures strategic continuity, technical depth, and execution discipline. Mr. Ahmad Jahangir and Mr. Fahad Jahangir, both graduates from reputed universities in the USA and the UK, respectively, have been serving as board members for the past four years. Their involvement has enhanced strategic bandwidth, financial oversight, and commercial direction, supporting the Company’s gradual shift toward higher value-added product segments and improved operational efficiency.

The Board currently oversees two key committees:

Audit Committee: Responsible for oversight of financial reporting, statutory audit coordination, and internal control effectiveness. The Internal Audit function operates primarily under this committee, reinforcing compliance, financial discipline, and procedural consistency.

Corporate Performance & Evaluation Committee: Responsible for human resource policy formulation, succession planning for key management roles, and monitoring of organizational performance metrics, thereby strengthening talent continuity, leadership pipeline, and operational accountability.

The committee structure provides a basic yet functional governance framework; however, the formalization of broader board charters, enhanced performance monitoring dashboards, and risk oversight mechanisms could further elevate governance maturity and institutional robustness.

HASNAIN ALI Chartered Accountants (QCR rated) are the external auditors of the Company. The auditors have expressed an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025, supporting adequate financial transparency, accounting discipline, and reporting integrity.

BTPL operates under a lean yet functionally comprehensive organizational structure, designed to optimize communication efficiency, operational responsiveness, and decision velocity. Core functional departments include: Accounting, Finance, Human Resources, Technical, Operations, Procurement The Finance and Administration Managers report to the CFO, while the CFO, Marketing Manager, General Manager Production, and General Manager Auto Coro (Unit-2) report directly to the CEO. This reporting hierarchy ensures clear accountability, effective functional coordination, and centralized strategic oversight.

The management profile is sponsor-led, supported by seasoned professionals with deep sectoral experience. Mr. Babar Jahangir (CEO) leads overall strategy, operational direction, and execution. Mr. Ahmad Jahangir (Director) oversees operations and finance-related functions, contributing to cost management, operational optimization, and financial discipline. Mr. Fahad Jahangir (Director – Commercial) heads commercial operations, driving market engagement, customer relationships, and pricing strategy. The professional management cadre is led by Mr. Abdul Basit (CFO), a Fellow Public Accountant (FPA) and Fellow Cost & Management Accountant (FCMA) with over 33 years of experience, including 19 years with BTPL. His long association ensures institutional memory, financial governance strength, and strategic continuity. Additionally, the General Manager Marketing, possessing nearly 30 years of textile industry experience, significantly strengthens market positioning, customer retention, and revenue stability.

While the Company does not operate through formalized management committees, senior leadership conducts frequent structured meetings to deliberate on strategic priorities, production efficiency, operational bottlenecks, and financial performance. This hands-on management approach supports high operational responsiveness, swift corrective action, and tight performance monitoring.

The Company has established a multi-layered Management Information System (MIS) framework. Daily operational dashboards are generated for senior management, enabling real-time monitoring of production efficiency, inventory flows, and dispatch cycles. In parallel, comprehensive monthly MIS packs provide financial, operational, and performance analytics, supporting strategic planning, cost control, and informed decision-making. The Company maintains an adequate IT backbone, utilizing licensed QuickBooks Accounting Edition since 2016 for approximately 10 corporate users, covering core modules including:

- Accounts Payable

- Accounts Receivable

- Inventory Management

- Procurement

- Order Management

- General Ledger

- Fixed Assets

- Cash Management

While the system provides functional coverage and operational support, the implementation of a fully integrated ERP platform remains critical to enhance data integrity, real-time visibility, internal control depth, and scalability, particularly in view of rising operational complexity and scale.

BTPL maintains an adequate control environment, supported by centralized networking architecture, role-based access controls, and structured data management protocols. Dedicated servers ensure data integrity, system continuity, and reliable backup mechanisms. The Audit Committee, supported by the Internal Audit Department, plays a pivotal role in reinforcing governance discipline, procedural compliance, and operational efficiency. The internal audit function conducts regular operational and financial reviews, with reports submitted directly to the Board of Directors, thereby enhancing transparency, accountability, and internal control effectiveness. Notwithstanding existing controls, the formal deployment of a comprehensive ERP system remains a critical enhancement area, essential for strengthening end-to-end process controls, minimizing manual interventions, and improving institutional risk management.

Pakistan’s textile exports improved during FY25, supported by gradual normalization in global demand and easing domestic financial conditions. Sector exports increased to USD ~17.3bln in FY25 (FY24: USD 16.7bln), reflecting a recovery led primarily by value-added segments, including garments and home textiles, while the spinning segment continued to operate under a highly competitive and margin-sensitive environment. Despite the improvement in export volumes, the operating landscape remained structurally constrained by elevated energy tariffs and the full-year impact of the Normal Tax Regime (NTR), which has materially altered post-tax profitability for export-oriented units. The imposition of corporate income tax and super tax under NTR has continued to compress net margins, particularly for low- to mid-tier spinning entities with limited pricing power and scale efficiencies. However, the progressive decline in policy rates during FY25 provided partial relief to financing costs, improving cash-flow dynamics and offering some cushion to debt-servicing metrics across the sector. In parallel, energy efficiency initiatives, particularly solarization, have emerged as a key structural differentiator, enabling relatively stronger cost positioning and margin resilience for companies with early investments in renewable energy. At the global level, evolving trade policies, shifting tariff regimes, and ongoing realignment of supply chains are expected to reshape competitive dynamics within major textile markets, particularly Europe and North America. These developments introduce both risks and selective opportunities for Pakistani exporters. While heightened competition and regulatory compliance requirements may intensify pressure on conventional suppliers, efficient spinning units aligned with quality, traceability, and sustainability standards stand to benefit from supply-chain diversification and buyer risk rebalancing. Overall, industry conditions during FY25 reflected a gradual shift toward stabilization, with future performance increasingly dependent on product mix optimization, export orientation, energy efficiency, regulatory adaptability, and financial discipline.

BTPL operates as a mid-sized dedicated spinning unit, with an installed capacity of ~60,156 spindles and an estimated annual production of ~11.33mln kgs of yarn, positioning it in the low-to-mid tier segment of the spinning industry. While scale constraints limit procurement leverage and pricing flexibility, the Company benefits from product specialization in viscose yarn, disciplined cost controls, and a structurally strong working capital framework, partially offsetting competitive pressures.

During FY25, the Company reported net sales of PKR 4.06bln, reflecting a material contraction of 30.7% YoY (FY24: PKR 5.86bln). The decline was strategic rather than demand-driven, emanating from management’s deliberate shift toward finer yarn counts, including 40s, 52s, and 60s, aimed at enhancing margin quality and product positioning. This strategic transition resulted in longer production cycles, lower daily output, and elevated energy intensity, temporarily compressing volumetric throughput. Additionally, as an indirect exporter, the Company’s demand profile remains closely linked to downstream exporters, whose order flows remained subdued during FY25. Encouragingly, operational normalization is underway, with 1HFY26 revenues rebounding to PKR 2.68bln, reflecting improved capacity utilization, stabilizing energy availability, and gradual downstream demand recovery. Management expects FY26 topline to surpass PKR 5.0bln, supported by normalized production cycles and enhanced energy efficiency.

Profitability remained thin yet resilient, consistent with sector dynamics characterized by elevated energy costs, cotton price volatility, and full-year impact of NTR taxation. During FY25, gross profit stood at PKR 290mln, translating into a gross margin of 7.1%, while net profit amounted to PKR 37mln, corresponding to a net margin of 0.9%. During 1HFY26, margins moderated temporarily (gross margin: 5.7%; net margin: 1.1%), primarily due to pricing pressures, cost absorption lag, and inventory realignment linked to product mix optimization. However, the evolving product strategy, combined with energy cost rationalization through solarization, is expected to stabilize margin performance over the near-to-medium term.

A key structural strength of BTPL is its proactive energy efficiency strategy. The Company has successfully commissioned a 2.1 MW solar power plant and completed installation of an additional ~1.2 MW, raising total solar capacity to ~3.3 MW, against a total sanctioned load of ~5.9 MW. Notably, the entire investment has been funded through internal cash flows, without reliance on bank financing. This initiative materially lowers exposure to grid tariffs, improves cost visibility, and structurally enhances margin sustainability, positioning the Company more favorably within an energy-intensive operating environment.

The Company maintains a tight and structurally efficient working capital framework, anchored in advance-based sales arrangements and nil trade receivables, materially compressing cash conversion cycles and limiting counterparty risk. During FY25, net working capital days increased to 98 days (FY24: 65 days), driven primarily by inventory accumulation linked to finer yarn production, which extended production cycles. However, working capital efficiency improved significantly in 1HFY26, with net working capital days declining to 67 days, supported by inventory rationalization and improved sales momentum. The Company’s current ratio strengthened to 5.2x in 1HFY26 (FY25: 2.3x), reflecting enhanced liquidity buffers and balance sheet flexibility. Working capital requirements continue to be predominantly met through short-term borrowings, which remain adequately managed and aligned with operational cycles.

Cashflow generation remains adequate but is sensitive to margin volatility and working capital movements. During FY25, FCFO stood at PKR 331 mln. In 1HFY26, FCFO amounted to PKR 62 mln, reflecting a slower pace of cash generation relative to the prior year, primarily due to lower profitability and inventory adjustments during the period. Consequently, interest coverage moderated to 1.0x in 1HFY26 (FY25: 2.8x), while operating cash flow coverage also softened to 1.0x (FY25: 2.2x). Although short-term coverage metrics appear compressed, expected energy cost savings from solarization and the gradual normalization of operations are anticipated to restore coverage ratios to more comfortable levels over the medium term.

The Company maintains a moderately leveraged capital structure, underpinned by progressive deleveraging and disciplined balance sheet management. Total borrowings declined to PKR 774mln in FY25 (FY24: PKR 1,271mln), resulting in improved leverage of 34.5% (FY24: 46.9%). During 1HFY26, borrowings increased moderately to PKR 959mln, reflecting seasonal working capital build-up, while leverage remained contained at 39.0%. The Company’s equity base strengthened to PKR 1,499mln in 1HFY26, supported by internally generated retained earnings, with no reliance on revaluation surplus, reflecting high-quality capitalization. Management remains committed to maintaining prudent leverage thresholds, with future expansion primarily targeted to be funded through internal cash generation, preserving financial flexibility and rating headroom.