PACRA Maintains the Entity Rating of Reliance Weaving Mills Limited

Reliance Weaving Mills Limited (RWML) is the textile arm of the Fatima Group; one of the leading conglomerates of Pakistan. The Company is a composite unit engaged in the production of yarn and greige fabric. The company’s weaving capacity is amongst the highest in the country on a standalone basis with 490 looms. Since its inception, the Company has undertaken continuous BMR translating into operational efficiencies and higher production volumes. During the period under review, RWML successfully ramped up its spinning capacity by 25,536 spindles to 91,152 spindles. The ratings reflect the sustained business risk profile of Reliance Weaving Mills Limited. During 1QFY24, the topline of the company increased by 27% YoY to stand at PKR 11,142mln (1QFY23: PKR 8,770mln). Conversely, the profit margins declined as a result of an inflated cost structure resulting in a diminution of the bottom line to PKR 102mln (1QFY23: PKR 353mln). The exports have a major share in topline clocking in at 63% with major exports to Asia, Europe, the U.S., and Africa. Going forward, the Company aims to undertake further expansion initiatives once inflationary pressures subside, financing them through a mix of internal and external sources. The Governance of the Company is considered strong. The Company has a strategic investment in the energy sector through a group company which provides it a competitive advantage over industry peers in terms of energy cost. The financial matrix indicates a leveraged capital structure, moderate coverages and working capital cycle. The management expects an improvement in the financial performance of the company in the upcoming quarters on account of the revival of export demand and the efficient procurement of raw materials. 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. During FY23, value-added products such as knitwear, bedwear, towels, and ready-made garments witnessed a decline of 13% YoY.
The assigned ratings incorporate strong sponsors' support and the explicit guarantee provided by the majority of sponsors on all debt-related obligations of the Company. Moreover, synergies between the group companies are considered positive.

About the Entity
Reliance Weaving Mills Ltd., a listed concern, commenced operations in 1990. The Company is engaged in the manufacturing and marketing of yarn and greige fabric. Reliance Weaving operates with seven units, constituting four spinning and three weaving units, having capacities of 91,152 spindles and 490 looms, respectively. Fatima Group owns a majority stake (80.8%) in Reliance Weaving. The Group has diversified interests in fertilizer, sugar, textile, energy, transmission, packaging, and foreign trade. Currently, the overall control of the Company vests in a seven-member board of directors with the Chairman – Mr. Fawad Ahmed Mukhtar, and the CEO – Mr. Faisal Ahmed Sheikh. Five directors are Fatima Group’s family members. The board comprises one executive director, four non-executive directors and two independent directors. Mr. Faisal Ahmed, a textile industry veteran, has diversified experience. He is supported by a team of seasoned professionals.