The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Upgrades Entity Rating of Gul Ahmed Textile Mills Limited | LT

Rating Type Entity
(07-Mar-23 )
(07-Mar-22 )
Action Upgrade Upgrade
Long Term AA- A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Gul Ahmed Textile Mills Limited (Gul Ahmed) has a remarkable history of operations, reflecting a formidable presence in the broader textile value chain. Gul Ahmed is a fully integrated unit and that has proven pivotal to the success story of the Company. One of the fully owned subsidiary Ideas (Pvt) Ltd. has built a strong forte in the retail space of the country now has more than 110 retail stores, offering a diverse range of products from home accessories to fashion clothing. Most of the top line of the Company emanates from exports. The Company has penetrated some of the good markets abroad, though the rising global inflation is a concern around the world, for future demand patterns. The export base is diverse. The Company enjoys an established customer base with several export destinations in European Countries and the United States of America. The sheer quantum of revenue base is huge, while focus on value-added products brings attractive gross margins. A great chunk of local sales is also indirect export. The presence of a seasoned senior management team that possesses considerable experience in the textile sector is also a comfort. The sponsoring shareholder is the driving force for business growth and sustainability. Import of raw materials is a challenge for many businesses these days. However, the very latest trend has shown that the company has been able to manage its business, due to the fact that it brings forex to the country. The raw material inventory is also being maintained for uninterrupted operations for a reasonable period of time. The liquidity profile is considered good with a manageable working capital cycle and sufficient cash flows to meet outstanding obligations while leveraging remains on the higher side. Improved trade leverage and increased coverage are also positive.
The ratings are dependent on the Company's ability to sustain its business profile while maintaining its margins and strong. Continuing operations is important. At the same time, prudent management of working capital needs and meeting financial obligations remain critical. Sponsor’s commitment to providing support gives comfort to the ratings.

About the Entity
Gul Ahmed Textile Mills Limited is listed on Pakistan Stock Exchange, commenced operations in 1953. The Company is engaged in the manufacturing of yarn, fabric, garments, and home textile products. The company has 27,648 spindles and 54,000 rotors installed in spinning yielding yarn capacity of 92m kgs per annum based on 20count. Gul Ahmed Textile has 530 looms with weaving capacity of 231,768 square meter per annum, based on 50 picks and the utilization level for FY22 was reported at 98%. Moreover, the Company has installed a knit dyeing plant of 30 tons per day for its apparel segment and has also ventured into medicated cotton with a greenfield project of 40 tons per day. Both these investments would further diversify Gul Ahmed’s position in export markets. The company is very focussed on increasing exports while diversifying its product mix to mitigate risk and maximize profits. Management control lies with the Bashir family, holding the majority stake in Gul Ahmed - Gul Ahmed Group through Gul Ahmed Holdings (Pvt.) Limited (~55.86%) and few companies under common management (~13.02%). The Company has a seven-member Board of Directors comprising four members of the Bashir family, one non-executive, and two independent directors. The Chairman, Mr. Mohammed Bashir, has over 4 decades of experience in the textile sector. He is a founding member of Gul Ahmed Energy and Habib Metropolitan Bank Limited. The CEO, Mr. Zaki Bashir, oversees the Company affairs with the help of an able 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.