PACRA Maintain the Entity Ratings of Be Be Jan Pakistan Limited

The assigned rating of Be Be Jan Pakistan Limited (“BBJPL” or “the Company”) reflects its adequate business profile within the competitive landscape of Pakistan’s textile industry. The Company operates across two segments: weaving and garment manufacturing. Its business strategy is anchored in delivering quality products and ensuring seamless project execution. The sponsor assumes an execution role, supported by an experienced management team. BBJPL capitalized on the growing demand and favorable pricing matrix for value-added products in the international market, having carved out its niche in the home textile segment. The client base comprises stable entities; however, the Company is susceptible to customer concentration risk, as the majority of business are derived from top-tier customers. Revenue grew by ~23% to PKR 7,055mln in FY24 (FY23: PKR 5,751mln), primarily driven by volumetric growth in home textile exports, supported by the recovery of international markets from a recessionary phase. Additionally, weaving and home textiles exhibited pricing improvements, indicating a progressively effective price transferability matrix. During FY24, gross margins were diluted due to an escalation in energy costs driven by increased electricity and gas tariffs, elevated labor expenses necessitated by inflationary pressures, and the higher cost of opening stock in finished goods. Concurrently, the surge in finance costs, stemming from higher short-term borrowings to support working capital requirements, resulted in a net loss after tax of PKR 282.02mln (FY23: profit after tax of PKR 18.53mln). The management of the Company is mindful of aligning its financial performance with projections. The Company is considering the installation of two gas engines to manage energy cost risks. Moreover, the gradual positive impact of declining policy rates will supplement the Company's profitability matrix and provide a cushion for cash flow management in the upcoming quarters. The industry's intensive working capital requirements, along with supply-side risks related to the availability of local cotton, may increase reliance on imported cotton and elevate the cost base. The financial risk profile is deemed adequate, with an aptly managed working capital cycle, while the credit quality metric shows an imperative for improvement. Textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln, and the spinning segment at USD 1.0bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability of export-oriented units, with a 29% tax on profits and an additional super tax of up to 10%.
The ratings depend on the company's ability to improve its profitability matrix while expanding business volumes. The augmentation of coverages and the stable generation of cash flows remain critical. Adherence to the debt matrix at an adequate level is a prerequisite for the assigned ratings.

About the Entity
Be Be Jan Pakistan Limited is an unlisted public company incorporated on November 19, 1978. The shareholding is distributed among family members, with Mr. Usman Ehsan Elahi holding a 49% ownership stake, followed by Mrs. Aisha Saqib (~34%), Mr. Faisal Ehsan Elahi (~8.6%), Ms. Marriam Saqib (~2.3%), Mrs. Fareeha Faisal (~2.3%) and Be Be Jan Protein Farms (Pvt.) Ltd (3.8%). The board comprises three sponsoring family members, with Mrs. Aisha Saqib serving as the CEO and Mr. Usman Ehsan Elahi as the Executive Director of the Company.