The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Updates Entity Ratings of Al Rahim Textile Industries Limited

Rating Type Entity
Action Upgrade Maintain
Long Term A- A-
Short Term A1 A2
Outlook Stable Stable
Rating Watch - -

Al Rahim Textile Industries Limited (Al Rahim) is a family-owned export-oriented towel manufacturing concern. The Company has diversified portfolio where product assortment ranges from daily use towel to high end fashion towels of different types and categories. The management asserts to have ~ 8% market share and positioned itself as 5th largest towel exporter. The Country's textile exports have witnessed a growth of ~ 23% in FY21 and stood at $15bln as compared to $12bln in FY20, whereas towel exports contributes ~ 6% (value wise) of it. The exports of towels increased by 14% value wise and ~ 8% volume wise in 1QFY22 as compared to same quarter last year which is a positive sign. 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 FY21, top-line of the Company increased by ~75% mainly due to overall industry growth and increasing demand in international markets. Moreover, the Company has completed its corporate transition phase where all assets, liabilities and business of sole proprietorship has been transferred to the new corporate entity. Key pillar of business strategy are product’s diversification and differentiation. The Company's financial risk profile is characterized by moderate leveraging and strong coverages and robust cashflows. Working capital cycle of the Company has improved due to prudent working capital management. The assigned ratings incorporate recent corporatization of the entity, growth trajectory, experienced management team, and expected sponsor support as demonstrated historically.
The ratings are dependent on upheld market share, optimal operations and top-line, sustaining margins and reducing customer concentration, while maintaining financial risk at low level is critical. Meanwhile, strengthening of 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 transition process has been completed in FY21. The board comprises three members of Saya Family. Mr. Faisal Rahim Saya (Son of Mr. Abdul Rahim) manages 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.