The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Maintains Entity Ratings of Saif Textile Mills Limited

Rating Type Entity
(30-Jun-22 )
(01-Jul-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Saif Textile Mills limited (Saif Textile), a prominent textile venture of the Saif Group, is involved in manufacturing and marketing several varieties of cotton yarn including, melange yarn, dyed yarn, and man-made yarn, and raw white yarn. The top line of the Company has recorded healthy growth. The assigned ratings take into account the increase in revenue, margins, and profitability during FY21 and 9MFY22 underpinned by higher volumetric sales and favorable yarn prices. The company’s financial risk profile remains adequate. Marginal improvement in coverage witnessed after healthy profitability; trend should be sustained. Leveraging remains towards higher end. Going forward, with better efficiency and a specialized product profile, the management expects Saif Textile’s margins to remain intact. The Company supplies to many downstream export-oriented units in Pakistan which are anticipating a strong rebound in global demand. The assigned ratings incorporate an experienced management team, the strong financial muscle of the Sponsors, and their willingness to support the entity as demonstrated historically. 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 internationally and the channeling of 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. However, month on month basis, textile exports have declined by 3.5%.
The ratings are dependent on managing financial obligations effectively while improving business margins. Any further accumulation of debt and/or shift from the current business strategy, impacting the risk profile of the entity, may negatively affect the ratings. Going forward, the Saif group's support for the entity and prudent debt management would remain critical. Strengthening of equity base remains essential for the ratings.

About the Entity
Saif Textile Mills Limited, incorporated in 1989, is engaged in the manufacturing and marketing of yarn. The Company operates with three spinning units installed at Gadoon Industrial Estate KPK, having a total capacity of 107,760 spindles. Saif Textile is also involved in the dyeing of yarn, though at a small scale. Saif Textile is majorly owned by Saif holdings (50%) followed by NIT (7%), State life (4%), and significant free-float (39%). Saif Holdings – holding company of Saif group, has interests in Textile, Feeds, Energy, Health, Technology, and Real Estate sectors. Saif Textile's board comprises seven members, including the Chairman - Mr. Assad Saifullah. Mr. Assad Saifullah was newly appointed on 1st June 2022. He graduated from the University of Pennsylvania in 2004. He is the CEO of Kohat Textile Mills Limited. He is also a director in other Group Companies. The board includes four non-executive directors, and one executive director, while two directors are independent. The board members have vast knowledge and expertise in the textile industry, though diversity in experiences exists as well, ensuring a requisite skill mix for strategic planning.

Mr. Osman Saifullah – CEO – newly appointed on 1st June 2022 after the resignation of Mr. Syed Masroor Hasnain (CEO). He holds a post-graduate degree in engineering from the University of Oxford and posts graduate degree in business administration from the University of Stanford.

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.