The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Maintains Entity Ratings of Kassim Textiles (Pvt.) Limited

Rating Type Entity
(31-Dec-22 )
(31-Dec-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Kassim Textiles (Private) Limited (Kassim Textile) flagship company of Machiyara group enjoys a long presence in textile and allied industry along with several other sectors. The Company operates with 3,304 rotors, 364 looms and have added 30,624 spindles which are operational in Mar22. Revenue is mainly driven from the manufacturing and sale of yarn and fabric in addition to having a portfolio of strategic investments in its subsidiary Kassim (Private) Limited. Over the year the Company has managed to maintain its optimal capacity utilization while upgrading its machinery in order to ensure operational efficiencies and eventually higher production volumes. The company’s top line clocked in at PKR 22.1bln in FY22 (FY21: PKR 15.7bln); where 81% (FY21: 84%) vests with exports. Further analysis reveals major contribution of denim cloth to several destinations and enjoys stable customer base local (Karachi, Lahore) and exports (Turkey, Bangladesh, Cambodia, and Greece etc). The share of Fabric sales recorded sizable improvement to PKR 18.6bln (FY21: PKR 13.8bln). The profitability of the Company improved in FY22, due to an increase in the topline. The margins of the Company declined due to increase in fuel and energy prices. While the strong coverage and good working capital cycle; give comfort to financial matrix. Going forward, with better efficiency and a specialized product profile, the management expects Kassim Textile’s margins to improve further. The Company supplies to many downstream export-oriented units in Pakistan which are anticipating strong rebound in global demand.
During 5MFY23, textile exports were valued at $7.44bln compared to $7.76bln, reflecting a 4% dip YoY – the declining trend recorded in the last two months. The fall in export value has mainly come from volumetric decline as prices of almost all categories have either increased or stayed flat. This has taken a fiscal year to date exports into negative with a 1.4% decline in the first four months (July – October) FY23. Among value-added items, bedwear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, cotton yarn has shown the largest decline of 35%. Moreover, 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 sustaining business profile of the Company by maintaining profitability and margins achieved from core textile operations.

About the Entity
Kassim Textiles (Private) Limited was incorporated on August 27, 1991 as a private limited company. It is a modern weaving unit that manufactures Denim fabric used for local and branded garment industry. The Company belongs to a prominent business venture of Machiyara Group. Apart from Kassim Textiles, the Group has presence in textile, construction and real estate development, mobile phones, and trading etc. Kassim Textile’s Board comprises four members, all are sponsors. The position of Chairman and CEO vests with Mr. Muhammad Shabbir. He belongs to the sponsoring family, possesses expertise in textile and has a future-oriented region for the Company. He is associated with the association for 3 decades. He is assisted by a professional and long associated management team.

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.