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PACRA Maintains Entity Ratings of Din Textile Mills Limited

Rating Type Entity
(08-Sep-23 )
(08-Sep-22 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Din Textile, a publicly listed company is a group concern of Din Group – one of the leading business groups established in 1954 having a presence across various sectors including textile, dairy, poultry, and real estate. Over the years, since its commencement, the spinning unit of the company comprises 124,608 spindles while the weaving unit has 144 looms. The spindles and looms are of advanced technology and, hence are operationally efficient. The ratings incorporate the Company’s business profile where the revenue emanates from two segments - spinning and weaving. The Company's spinning product portfolio comprises combed compact yarn, core spun lycra yarn, slub lycra yarn, dyed yarn, melange yarn, ply yarn, gassed yarn, and bleached cotton web for surgical and cosmetic use while the weaving product portfolio comprises greige fabric. The management is planning to further diversify the revenue stream by tapping into the value-added segment of the textile industry. The company has reflected promising performance since its inception. During 9MFY23, the company's revenue inched up by 2.4% to stand at PKR 23,033mln (9MFY22: PKR 22,483mln) due to the contraction of demand at the local level. The company majorly draws its revenue from local sales with exports fluctuating at around 22.5% of the total revenue. In recent quarters, higher costs of raw materials consumed along with a sizable increase in finance costs have affected the net profitability significantly. Margins reflected attrition YoY. Moreover, the financial matrix reveals moderate leveraging, weakened coverages, and a stretched working capital cycle. During FY23, textile exports were valued at $16.5 billion compared to $19.33 billion, reflecting a dip of 15% YoY – the declining trend has been witnessed by the start of FY23. The exports tumbled attributable to high energy costs, shortage of cotton, and uncertainty in the foreign exchange rate. The suppressed demand pattern exhibited by export avenues was also a challenge. During FY23, value-added products such as knitwear, bedwear, towels, and ready-made garments witnessed a decline of 13% YoY. The basic textiles including raw cotton, cotton yarn, and cotton cloth posted a drop of 21% YoY. During the month of June 2023, cotton yarn exports increased by 7% MoM. The value-added exports reported a volumetric increase of 16% on a MoM basis.
The ratings are dependent on intact business operations under the current economic conditions and draw comfort from the sponsor profile. Improving margins, healthy coverages, and capital structure while growing the business profile remains critical for the company. Any deterioration in the financial profile will have a negative impact on ratings.

About the Entity
Din Textile Mills Limited (Din Textile or DTML) is a public limited company, incorporated in 1988. Din Textile Mills Ltd is engaged in the manufacturing and sale of yarn. Its product portfolio comprises combed compact yarn, core spun lycra yarn, slub lycra yarn, dyed yarn, melange yarn, ply yarn, gassed yarn, and bleached cotton web for surgical and cosmetic use while weaving product portfolio comprises greige fabric. The overall control of the Company vests in a nine-member board with Shaikh Muhammad Jawed as Chairman. Three are non-executive directors, three are executive directors and three members are independent directors. Shaikh Muhammad Naveed manages day-to-day operations as CEO of the Company. He is supported by a team of experienced professionals.

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.