The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains Entity Ratings of Glamour Textile Mills Limited

Rating Type Entity
(13-Nov-23 )
(16-Nov-22 )
Action Maintain Initial
Long Term BBB- BBB-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Glamour Textile Mills Limited (“The Company” or “GLMT”) rating reflects an adequate market share in the textile spinning industry of Pakistan as the Company has 42,384 spindles in comparison to an industry’s installed capacity of ~13.4mln spindles. As of FY23, the spinning industry has a capacity utilization of ~69.3%. The company has a presence in the local market and deals in manufacturing carded yarn of two blends Cotton, and viscose (Coarse (1s –20s), Medium (21s –34s), Fine (36s –47s) & S. Fine (48s–80s). The Companies dedicated to spinning only have an inherent risk of 100% single product concentration and dependency on a sole raw material, primarily raw cotton. This situation can lead to potential vulnerabilities in the supply chain if the supply side disrupts. According to the Pakistan Bureau of Statistics (PBS), as of FY23, Pakistan’s yarn production stood at 281,000MT (PKR 212bln export value) and showed a volumetric dip of ~22.0% with respect to the same corresponding period last year. The projected cotton production estimate of FY24 is revised and projected to be 11.5mln bales and currently, production reached up to ~6.0mln bales surpassing FY23's total production of 4.91mln bales. In addition, the economic recession and last season's catastrophic flooding in a substantial portion of Pakistan have had a detrimental impact on cotton crops, potentially posing a barrier to raw material availability. As a result, the cost of production is likely to rise, and as a result, finished goods costs, such as yarn, are predicted to increase as well. However, in FY24 better local raw cotton yield is expected to supplement the Companies for import substitution. Pakistan's requirement for imported cotton stands at 3.5 million bales to 4 million bales this year. The uplift of subsidized rates on energy tariffs, the surge in tax burden, and uncertainty with respect to the PKR movement are other challenges specific to the industry. The top line of the Company declined by 22% mainly on the back of sluggish yar demand coupled with the economic recession. During the period under review, expensive raw material procurement coupled with higher interest and tax burden has triggered loss after tax and squeezed the margins of the Company. The company’s financial risk profile is adequate, given the inventory management at an optimal level and the dip in short-term trade leverage. The company’s cash flows are under stress creating pressure on the coverages. The Company’s low-leveraged capital structure has mainly supplemented the financial risk profile.
The ratings are dependent on the Company’s ability to sustain its operations and capacity utilization in prevailing conditions. The adherence to the debt matrix at an optimal level along with maintaining cashflows and coverages at an adequate level remains critical for the ratings. The impact of elevated energy tariffs on the Company’s profitability and margins needs to be observed

About the Entity
GTML was incorporated under the repealed Companies Ordinance 1984 (now the Companies Act, 2017) on September 14, 1991. Mr. Asad Elahi directly owns 27% and indirectly through his wife and his two sons owns 2%, Mr. Azhar Elahi -CEO and Chairman of the Company directly owns 27% and indirectly through his wife and his son owns 2%, Mr. Ather Javed Elahi directly 26% and indirectly through his wife and his son owns 2% and the remaining is with Mr. Mansoor Elahi and joint stock companies. The Company has an eight-member board with the presence of sponsors and their families.

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.