The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Initial Entity Ratings to Lucky Tex Pakistan (Pvt.) Limited

Rating Type Entity
(27-May-22 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The assigned ratings of Lucky Tex Pakistan reflect adequate positioning of the company in the relative universe. It’s a family-owned private company where ownership rests equally among two shareholders. Position of Chairman and CEO is segregated. The Company’s management involves experienced professionals, aided by good reporting. The company has board product slate including Fabric, Bed Linen, Curtain and Kitchen Articles. Over the years, the Company’s topline has been following an improving trend. During FY21, sales revenue improved to PKR 3bln (FY20: PKR 2.4bln) where sales mix remained tilted towards exports. Net profitability witnessed improvement whilst margins recorded marginal uptick. Management of receivables is essential. Customer concentration has remained high, during last few years. The management is eying sizable improvement in the same with the addition of new customers. Going forward, strategy is to focus on achieving vertical integration where special emphasis will be on business margins rather than inventory gains. The financial matrix reveals low leveraging, improved working capital cycle and good coverage. Equity base of the Company is revealing comfortable picture with good risk absorption capacity. 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.
The ratings are dependent upon management ability to improve margins, profitability and financial profile. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any deterioration in debt coverage leading to higher financial risk or subdued profitability will have a negative impact on ratings.

About the Entity
Lucky Tex Pakistan (Pvt.) Limited commenced operations in 1993, its foundation laid by by Mr. Ahmed Tabba. The Company’s Processing Unit is geared to handling fabric widths up to 3.2 meters and weights from 80 - 300 gms/square meter. Lucky Tex Cut to pack division is designed and equipped for a daily production of about 5,000 curtain pairs and 10,000 bed sets (Filled / Unfilled) and it is divided into seven sub-divisions. A Power Generation Plant was also installed in the year 2000 to fulfil power requirements. Mr. Ahmed Tabba is the founder and chairman of the Company and has been involved in the textile business for 38 years. Tabba family was involved in the trading business, and until 1983 were commercial importers and exporters on the pattern of Japanese trading companies

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.