The Pakistan Credit Rating Agency Limited
Press Release


Iram Shahzadi

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PACRA Maintains the Entity Rating of Kohat 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 - -

The ratings reflect the moderate business profile of Kohat Textile Mills Limited (Kohat Textile). The Company caters to the needs of local industry and deals in specialized products i.e. polyester yarn, acrylic yarn, and viscose yarn. During 9MFY22, Company’s revenue improved to PKR 3.3bln (9MFY21: PKR 2.5bln); sales are done locally. Margins and net profitability are enhanced attributable to favorable sector dynamics. In the current year, lower finance costs supported profitability. Non-core expenses emerged in 9MFY22 and should be contained going forward. The financial risk matrix reveals moderate leveraging with room for improvement in coverage. Further augmentation in core coverage will provide comfort with approaching scheduled principal repayments. The equity base recorded limited growth in the last few years due to restricted profitability and limited funds retained. The assigned ratings derive comfort from an experienced management team, the strong financial muscle of the Sponsors, and their timely support to the Entity in the form of subordinated loans. Going forward, the Company is planning to acquire debt to finance CAPEX. Material improvement in cash flows in line with upcoming debt obligations remains imperative. 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 the Company’s ability to sustain its operations in prevailing conditions. Significant deterioration in revenues and/or debt coverages due to the prolonged downturn leading to higher financial risk or subdued profitability will have a negative impact on the ratings. Saif Group's support of the Company will remain critical.

About the Entity
Kohat Textile commenced operations in 1967 and was listed on PSX in 1970. Kohat textiles is a subsidiary of Saif Holdings, with a majority stake (~77.98%). The remaining shareholding rests with financial institutions (10%), the general public (10.12%), and directors (0.87%). Saif Group is one of the renowned corporate groups in Pakistan. The Company operates with a single spinning unit having a capacity of 38,460 spindles - manufacturing specialized yarn.

The board comprises seven members, all from the sponsoring group, with Osman Saifullah Khan as the Chairman of the BoD. Board members have diversified experience and relatively long association with the Company. Management control vests with Saif Group. Assad Saifullah – the CEO – primarily manages the Company’s affairs, supported by a team of seasoned professionals.

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.