PACRA Maintains Rating of Fazal Holdings (Pvt.) Limited

The ratings incorporate the established position of Fazal Holdings (Pvt.) Limited ('Fazal Holdings' or 'the Company’) as a conglomerate with a diverse pool of investments across leading corporate sectors. The Company's investment portfolio comprises Strategic Investments (~54% of the total investment value) and Trading Portfolio (~46% of the total investment value). The Company has strategically invested in Fazal Group’s flagship company 'Fazal Cloth Mill Limited' (FCML), which has the vision to establish a vertically integrated textile business that produces value-added products with a mid-tier production capacity amongst other players. FCML specializes in producing greige fabric and a variety of yarns which include; multi-count/multi-twist, double, zero-twist, Organic, Supima, Lycra, Giza, and USA cotton yarns. Moreover, FCML achieved its highest sales with trajectory growth of ~25% through efficient plant operations, resulting from high sales volume and gains earned through export. Fazal Holdings has designed a conservative investment policy in accordance with its equity, primarily investing the majority of its trading portfolio in blue-chip shares. The Holding Company’s short-term investment portfolio shows a positive growth of ~65.3% as of FY24. The short-term portfolio has been aligned to match the economic conditions at play. The enhancement of the investment trading portfolio throughout FY24 is directly attributed to the market's regained momentum during the year. The short-term investment portfolio is regarded as highly liquid and concentrated in high-quality assets. However, the Company remains exposed to market risks stemming from fluctuations in the stock prices. Fazal Holdings derives its revenue mainly from dividend income through short-term portfolio and capital gains, along with a share of profit from associates. The businesses under Fazal Holding's umbrella have maintained a steadfast growth trajectory, demonstrating the strength of Fazal Group's strategic approach. The Company's substantial free cash flows have significantly improved its debt profile, resulting in a marked enhancement of its interest coverage ratio. The Company has strengthened its capital structure by decreasing short-term debt and optimizing working capital through better cash flow management. Investment decisions are mainly led by Mr. Rehman Naseem, with assistance from resources within Fazal Group’s and certain research/brokerage houses. Herein, the institutionalization of investment policies would be beneficial. Continued sponsor support remains a key rating factor.
Ratings are dependent on the management's initiative to strengthen investment decision making process and performance monitoring mechanism of underlying portfolio. The rating is supported by group substantial financial strength, portraying its ability to support Fazal Holdings if needed. At the same time, adhering to agreed financial matrix and keeping debt coverages at adequate level remains critical.

About the Entity
Fazal Holdings (Pvt) Ltd (‘Fazal Holdings’) is Private Limited Company acting as a holding company for Fazal Group. Fazal Group was incorporated in 1966 and is a renowned textile Group in Pakistan. Fazal Cloth Mills Ltd. – the flagship Company of the Group, was also incorporated in 1966. Fazal Holdings is owned by the members of the sponsoring family i.e., Fazal family. Majority of shares reside with Mr. Rehman Naseem (~47.25%). Mr. Aamir Naseem Sheikh’s family owns a stake of ~47.25%; through his sons, Mr. Yousaf Aamir and Mr. Abdullah Aamir, owning ~22% each, in the Company. While remaining shareholding resides with Mr. Sheikh Naseem (~2.5%) and Mrs. Nighat Naseem (~3%).