The Pakistan Credit Rating Agency Limited
Press Release


Sehar Fatima

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of Khas Textile Mills (Pvt.) Limited

Rating Type Entity
(23-Aug-22 )
(23-Aug-21 )
Action Upgrade Maintain
Long Term BBB- BB+
Short Term A2 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect the small yet adequate business profile of Khas Textile Mills (Pvt.) Limited. Over the last two years, the Company’s revenue base recorded a healthy increase. The company manufactures various types of the cotton ring and open-end yarn. The company is associated with Khas Group of Industries where the group has a presence in diverse sectors; including textile, aluminium, poultry, socks, knitwear, and import of building hardware. The Company’s sales volume was enhanced due to an increase in local sales from last year and better yarn prices. The pattern of sales volume will remain correlated with demand patterns in the local market which in turn is connected with the demand trend of export destinations. Margins recorded improvement due to better yarn prices. Improved financial risk profile attributable to a declined leveraging and healthy increase in coverage. The debt structure is skewed towards long-term borrowings. Further, room to borrow displayed improvement along with sizably reduced debt payback. Going forward, upholding improved performance recorded in recent quarters along with sustaining the financial risk profile remains important. Efficient utilization of enhanced capacity is considered essential. During FY22, Pakistan's textile exports surged to $19.3bln (recording a growth of 26%). Exports grew owing to increased volumetric growth of (16% YoY) in the value-added segment, a steep rise in global demand, and record high cotton prices. Under the value-added category, the knitwear segment remained the top performer by posting 34% YoY growth in exports to $5.1 billion in FY22 due to a sharp rise in global demand, especially in the US and European countries. Other value-added segments such as ready-made garments, bed wear, and towel posted YoY growth of 29%, 19%, and 19% to $3.9 billion, $3.3 billion, and $1.1 billion respectively. However, a slowdown is expected in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries.
Strengthening of governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will have a negative impact on ratings.

About the Entity
Khas Textile Mills (Pvt.) Limited was incorporated in 2001 as a private limited company. The Company is engaged in manufacturing of different types of the cotton ring and open-end yarn. The Company currently operates 19,680 spindles and 1344 rotors and has a purpose-built manufacturing facility located in the industrial hub -Nooriabad. The Company is entirely owned by the Ashfaq family, which includes Mr. Haji Ashfaq Ahmed and his wife (20%) and two sons (i) Mr. Khurram Ashfaq (40%) and (ii) Mr. Noman Ashfaq (40%) individually and through their respective families. The board comprises five directors. All of them belong to the sponsor family. Mr. Ashfaq Ahmed – chairman of the Company has over 45 years of experience in diverse industries, including textiles. Mr. Khurram Ashfaq – Managing Director – has over 23 years of experience in the textile industry and is supported by an experienced management team. Rahman, Sarfaraz, Rahim, Iqbal, Rafiq & Co. Chartered Accountants are the auditors of the company.

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.