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PACRA Maintains Entity Ratings of Sefam (Pvt.) Limited, Assigns 'Rating Watch'

Rating Type Entity
(21-May-20 )
(21-Nov-19 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes -

The ratings reflect Sefam (Pvt.) Limited’s reputable image as one of the leading players in the clothing/home textile retail industry with several established brands. The Company operates a complete range of clothing brands targeting all segments of the retail market. The major portion of the Company's raw material is sourced from group companies, which allows efficient supply chain management while ensuring quality. The Company has managed to sustain growth in revenues and profitability based on strong branding, despite sluggish trend and stiff competition in the retail market. However, since COVID-19 outbreak and subsequent lockdown, the Company has witnessed significant drop in sales. The Company has to resort to online sales, which constitute very small part of its overall revenues. The Company's profitability is expected to suffer in current circumstances. Ratings draw strength from the Company’s strong financial profile, recently augmented by the declaration of previously undeclared inventory under the amnesty scheme in FY19. The capital structure remains low leveraged with strong coverages and efficient management of working capital.
The Rating Watch signifies the prevailing uncertainty due to the outbreak of COVID-19 pandemic. This has impacted the entire textile chain as demand contracts due to shutdown in domestic and global markets and tough economic conditions. SBP measures have provided some respite in this regard. The Company’s production facilities, as well as shops, have been shut down in line with the provincial Government’s directive of lockdown. However, eventual easing of lockdown since has provided much needed relief. PACRA is closely monitoring the situation and will take rating action accordingly.
The ratings are dependent on sustaining business performance amidst prevailing tough conditions. Full resumption of operations and reopening of shops, and maintaining strong financial profile amidst lower revenues is critical. The Company’s ability to improve the governance framework by hiring better financial auditors will remain important.

About the Entity
Sefam (Private) Limited, incorporated in 1989, is part of the Sarena, Sefam and Ali Group of Industries, most famous for its fashion brand Bareezé. The Company operates a total of 10 brands which cater to different segments of the market. Additionally, the Company sells high-end foreign brands (Ralph Lauren & Giorgio Armani) through its wholly-owned subsidiary, S-Luxe (Private) Limited. Moreover, the Company also operates 6 ‘The Entertainer’ franchises across the country.

Ownership of the company lies with the four children of Mr. J.A Zaman (late). Mr. Zaman founded Ali Embroidery Mills (Private) Limited in 1972, which later became the launching pad for Sarena, Sefam & Ali Group of Industries. Mr. Hamid Zaman and Ms. Seema Aziz hold 42% of the Company, each. Meanwhile, Mr. Tariq Zaman and Ms. Ambreen Zaman hold the remaining 16% equally. Ms. Seema Aziz is the Managing Director of the Company whereas various brands are managed separately by dedicated teams.

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.