The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Initial Entity Ratings to Alhamd Corporation (Pvt) Limited

Rating Type Entity
(22-Feb-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

The assigned ratings of Alhamd Corporation (Pvt) Limited reflect good positioning of the Company in the textile spinning industry. The Company’s history goes back to 1983 when it was incorporated as a Public Limited Company. Afterwards, in 2005, it was converted to Private Limited Company. Alhamd is a family-owned business engaged in manufacturing and selling of cotton/blended yarn. Governance framework lacks independent oversight. The Company has 126,696 spindles installed – manufacturing facility located in Dera Ghazi Khan. The planned capacity expansion of 43,776 spindles is deemed to be added to the profile post FY22. Recently, enhanced capacity utilization (FY21: 97%) has provided stimulus to the profitability of the Company. Revenues are majorly driven by local market where the company enjoys long association with reputed clientele. The management is positive about maintaining the growth trajectory. Margins recorded sizable improvement attributable to enhanced efficiency and strong sector driven factors where significant increase in demand has been witnessed. The financial risk matrix reflects comfortable picture with fairly low leverage. The Company’s planned expansion will increase the leveraging, in the upcoming years, but expected to remain range bound relative to equity base. Going forward, vigilant handling of leverage amidst increasing interest rate environment remains vital. During the period July-December FY21-22, textile exports of the country surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. In the local market, the textile sector has recorded strong performance. The sustainability of demand pattern for the current higher orders from Europe and USA remains essential for the feasible utilization of added capacity by textile players.
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, going forward. Excessive borrowing, leading to higher leverage and/or deterioration in coverages, can impact the ratings. Going forward, timely commencement of additional capacity to finance repayments will remain important.

About the Entity
The Company was incorporated in 1983 as a public limited company, under the previous name: Alhamd Textile Mills Limited. Later, voluntarily delisted from the Stock Exchanges in 2004 and converted to a private limited company in 2005. The core operation of the business is manufacturing and sale of cotton/blended yarn. The Company has 126,696 spindles installed. Manufacturing facility is located in Dera Ghazi Khan, a major cotton-growing area of Pakistan.
Alhamd Corporation (Pvt) Limited is a family-owned business, with the majority stake (74%) vested with Sheikh Afzaal Ahmed, and his son, Mr. Asad Imdad Sheikh, who owns 25% stake in the company. There are four board members in place, two from the sponsor family: Sheikh Afzaal Ahmed and Mr. Asad Imdad Sheikh and rest are the executive directors: Mr. Muhammad Ilyas and Mr. Manzar Farook.

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.