PACRA Assigns Positive Outlook to Entity Ratings of Eastern Garments (Pvt.) Limited

The ratings reflect improving business profile of Eastern Garments (Pvt.) Limited, an export-oriented knitwear unit. In the past, the Company’s sales mix predominantly comprised of knitwear along with woven garments. However, company has closed woven garments division during the period. Though, the business risk remains high owing to the global knitwear industry’s reliance on few key players as well as competitive international denim market. Profitability sizably improved along with good margins. On a standalone basis, the Company’s customer concentration remains high. However, comfort is drawn given its relationships with established international brands. Ratings incorporate stable financial profile characterized by modest leveraging and strong coverages. Ratings further reflect the professional management team as well as sponsors ability to provide support when required, as demonstrated in the past. Meanwhile, the corporate governance framework needs improvement. Going forward, the company has enhanced the production capacities, acquiring new machinery for knitting and dyeing. 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 channelling 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.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at optimal level and sustain margins. Excessive borrowing, leading to higher leverage and/or deterioration in coverage, can impact the ratings negatively. Meanwhile, improvement in governance framework and equity growth remains important.

About the Entity
Eastern Garments (Pvt.) Limited, incorporated in 1980, is engaged in the production and sale of knitwear and woven garments. Its operations comprise knitting, dyeing, finishing, printing, embroidery and stitching. The Company’s production facilities are divided into six units, all located in Sindh Industrial Trading Estate, Karachi. The Company’s shareholding rests equally with Mr. Noor Mohammed and his son, Mr. Nizar Noor.

Overall control of the Company vests in a two-member Board of Directors, comprising the sponsors. Mr. Noor Mohammed is the Chairman and CEO of Eastern Garments with background in banking and over four decades of experience in the textile industry while Mr. Nizar Noor has been the Managing Director of the Company since 1997. The management team comprises experienced and professional individuals with significant autonomy to execute operational matters.