The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Initial Entity Ratings to Ali Embroidery Mills (Private) Limited

Rating Type Entity
(23-Jan-23 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The ratings of Ali Embroidery Mills (Private) Limited (Ali Embroidery) reflect its sustained business profile. The Company is a family-owned private limited company which operates with 30 Schiffli and 108 Multi- Heads embroidery machines. The embroidery industry consists of several players operating on small scale with informal structures. However, Ali Embroidery has tiered organizational structure with good operating capacity. The ratings reflect sustained business profile over the years where recently an improvement has been recorded in revenues. During FY22, the company's topline reflected growth to PKR 1.2bln (FY21: PKR 959mln). The company has witnessed an increasing trend of customer sales, majority of the revenues are generated from related parties, while the rest of the customer base has also contributed over the years. During the period, operating profit and PBIT margins have improved. Ratings also incorporate adequate financial risk manifested by suitable working capital and coverage. During FY22, Pakistan's textile exports surged to $19.3bln (recording a growth of 26%). Exports grew owing to increased volumetric growth of (16% YoY) in the value-added segment, a steep rise in global demand, and record-high cotton prices. Under the value-added category, the knitwear segment remained the top performer by posting 34% YoY growth in exports to $5.1 billion in FY22 due to a sharp rise in global demand, especially in the US and European countries. Other value-added segments such as ready-made garments, bed wear, and towel posted YoY growth of 29%, 19%, and 19% to $3.9 billion, $3.3 billion, and $1.1 billion respectively. However, a slowdown is expected in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries.
The ratings are dependent on the management’s ability to uphold the entity’s performance trend. Meanwhile, maintaining strong margins and coverages to fulfill financial obligations will remain critical. Improvement in the governance framework is considered important.

About the Entity
Ali Embroidery Mills (Private) Limited (Ali Embroidery) was incorporated in Pakistan in 1972 as a private limited Company. Ali Embroidery is part of the Sefam Group of Industries head quartered in Lahore, Pakistan. The group takes pride in claiming themselves as the pioneers of introducing the concept of brands in Pakistan. Ali Embroidery was set up by Mr. J.A Zaman (late) and later became the launching pad for Sefam (Private) Limited and Sarena Textile Industries. The Company was initially engaged in doing Schiffli embroidery for the local wholesale market. M/s Arshad Raheem & Co. Chartered Accountants are the external auditors of the Company. They have expressed an unqualified opinion on the financial statements of the Company for the year ended June 30, 2021.

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.