PACRA Assigns Initial Entity Ratings to Meko Denim Mills (Private) Limited

The Company's ratings underscore its strong business profile, exemplified by a trajectory of ascending revenues and profitability in its initial phase of operations. These ratings factor in the strong business acumen of its sponsors, establishing the group as a vertically integrated textile powerhouse. The Company functions as a composite denim unit within the textile sector. Through prudent investment in Business Modernization and Reinvestment (BMR) initiatives and expansion endeavors, Meko Denim has fortified its competitive advantage by implementing advanced technological upgrades and pursuing diversification strategies. This strategic approach has facilitated the capture of the burgeoning international market’s garments and fabric demand as well as local yarn demand, while exports are also deftly channeled through the group corporate entities of KAM International and KAM Apparel. The operational spectrum encompasses ginning, spinning, weaving, and processing. Recently, the company has ventured into the value-addition segment by adding a garment segment unit and is enjoying a good response from export destinations. A marketing strategy is devised to further enhance the current product’s penetration in international markets. The Company has witnessed a substantial upswing in top-line revenue, supported by enhanced gross profit and operating margins, thereby bolstering its overall business standing, leading to a reported bottom line of PKR 220mln in 3MFY24, a 47% surge compared to PKR 150mln recorded in FY23. The financial risk landscape reflects a less leveraged capital structure with healthy interest coverages. The strategy is to build and grow prudently through the initial phase of operations, with a focus on realizing the full potential in the forthcoming years.
The ratings are dependent on the Company’s ability to establish a strong business profile and optimal capacity utilization. Improvement in the management and reporting mechanism and governance framework would be critical for the ratings.

About the Entity
Incorporated in 2021, Meko Denim Mills (Private) Limited operates as a comprehensive denim producer within the textile industry. Currently, Meko Denim is actively involved in the entire denim production process, encompassing spinning, weaving, and processing of denim fabric. The company’s operations are supported by ~44,000 spindles, 234 looms, 2000 rotors, and 200 stitching machines. Meko Denim is a business owned by the family of Mr. Shoaib and Mr. Khalid Majeed. Mr. Shoaib Majeed holds the majority stake, owning 55% of the shares, while Mr. Khalid Majeed possesses a 25% share. Additionally, Mrs. Kiran Bano, the wife of Mr. Shoaib, holds a 20% share in the company. Meko Denim's Board consists of five members, including three sponsors and two non-executive directors. The overall management of the Company rests with the CEO, Mr. Shoaib Majeed.