PACRA Maintains the Entity Ratings of KAM International

The ratings of KAM International emanate from the sponsor's business profile encompassing all aspects of the textile value chain. KAM International is a business venture of Mekotex Group, with three other entities operating under its umbrella: Mekotex (Pvt). Limited, Meko Denim Mills (Pvt). Limited and Meko Textile (Pvt). Limited. This structure enables them to manage volatility in the respective industry. KAM International exports home textile products to Europe and the USA, including bed sheets, quilts, pillow covers, cushions, and bedding sets. These products are designed to meet international customer’s specific requirements and quality standards. This production mechanism is supplemented by an annual production capacity of ~39.6mln meters of fabric, ~12.0mln meters of printed fabric, and ~14.0mln pieces of garments. On the strategic side, the management intends to venture into the towel segment in the coming years driven by a higher potential for margins and opportunity to diversify its income stream. During FY24, the topline reflected a robust increase at PKR 12.2bln (FY23: PKR 8.7bln); dominated by the export sales with a major contribution of ~95.5%. Bed sheet is the foremost product in terms of product pricing and quantity. The escalated raw material prices and the surge in finishing charges squeezed the GP margin. However, the self-sufficiency in meeting energy requirements was accompanied by an 8-megawatt power generation boiler. The elevated operating expenses coupled with magnified finance cost has diluted the profitability matrix (FY24: PKR 580mln; FY23: PKR 1.6bln). The financial risk profile of KAM International is considered adequate with a leveraged capital structure and a gradual improvement in working capital management. Over the years, the consistent withdrawal of funds from the retained earnings to support the expansion at the group level has caused the depletion in the equity levels. The establishment of a corporatization structure will augment the ownership profile and governance framework. The country's textile exports 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. During 5MFY25, the textile exports stood at USD 7.6bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry.
The ratings are dependent upon the sustainable growth in business volumes while maintaining the profitability matrix at an optimal level. The improvement in coverages and generation of sufficient cashflows from core operations remain critical. Adherence to the debt matrix at an optimal level is a prerequisite for assigned ratings.

About the Entity
KAM International, incorporated on August 7, 1996, operates as a sole proprietorship. It has an integrated network comprising weaving, printing, dyeing, finishing, cutting and stitching units. The owner, Mr. Shoaib Majeed brings with him over twenty-five years of experience. The CEO, Mr. Rayyan Ahmed is accompanied by a team of seasoned professionals.