The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Upgrades Entity Rating of Al-Rahim Textile Industries Limited

Rating Type Entity
(28-Dec-22 )
(28-Dec-21 )
Action Upgrade Upgrade
Long Term A A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Al-Rahim Textile Industries Limited is a family-owned business established in 1991. Al-Rahim is a leading towel manufacturer and exporter. The Company owns a modern, state-of-the-art plant & machinery to produce quality products- towels, towel garments, and kitchen linens. Processes are vertically integrated which gives good control over all steps of production and contributes towards efficiency. Over the period Al-Rahim has gone through different phases of capacity expansions in air-jet terry weaving, yarn-dyed & jacquard towel manufacturing, terry and fabric dyeing, printing, and Stitching. Al-Rahim has developed a strong customer base which is the company's greatest asset. The company aims to provide the highest quality product to achieve customer satisfaction through innovation, commitment, integrity, and efficiency. Al-Rahim Textile Industries has valid certificates for its products and facilities and is periodically audited by internationally recognized certification bodies including Oeko Tex 100 Class-I and Class-II, BSCI, C-TPAT, Sedex, GOTS, SCAN, BCI, Egyptian Cotton Gold Certificate, GRA, RCS, Cradle to Cradle, Made in Green, EcoLabel and BRC. The management asserts to have ~10% market share. The Country's textile exports have witnessed a growth of ~ 26% in FY22 and stood at $19bln as compared to $15bln in FY21, whereas towel exports contributed ~6% (value wise) of it. The towel industry enjoys relatively better margins that are reflected in Al Rahim’s profitability on the back of local cotton, which is more suitable for manufacturing towels. During FY22, the Company's topline clocked in at ~PKR 22,522mln out of which PKR 20,398mln from the exports sales and PKR 2,124mln from the local sales, reflecting growth of ~66.5% on a YOY basis mainly due to volumetric growth and price impact. In FY22 direct export sales increased by 94% in local currency and 73% in dollar terms. Sponsors have a good understanding of the business and they are actively involved in all business decisions. Key pillars of business strategy are maintaining a diversified customer portfolio with a lower concentration and also producing the complete range of terry towel products. The Company's financial risk profile is characterized by robust coverages, cashflows, and a comfortable working capital cycle. Capital structure is leveraged and mainly comprised of short-term borrowings for working capital management.
The ratings are dependent upon improvement in market share, optimal operations, sustaining growth in top-line, and retaining sufficient margins while maintaining financial risk at a low level is important. Meanwhile, strengthening the governance framework for better oversight of strategic affairs is considered essential.

About the Entity
Al Rahim Textile Industries Limited (Al Rahim) traces its roots to Al Rahim Textile industries, which operated in the textile industry as a sole proprietorship since 1991. In order to strengthen the corporate structure, a public unlisted company was formed by the name of Al Rahim Textile Industries Limited in July 2019. The board comprises three members of the Saya Family. Mr. Faisal Rahim Saya (Son of Mr. Abdul Rahim) manages the overall business affairs of Al Rahim as CEO.

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.