PACRA Maintains the Entity Ratings of Basfa Textile (Pvt.) Limited

The Basfa Textile (Pvt.) Limited (“the Company” or “BTPL”) rating emanates from the adequate profile of the Company in the spinning industry of Pakistan. BTPL is engaged in the manufacturing and sale of Viscose Yarn and different varieties of cotton yarn with an average yarn count of 20s and an operating capacity of ~60,156 spindles. The Company has successfully completed the installation of a 2.1-megawatt (MW) solar power plant and is in the process of installing an additional 1.2 MW solar power plant. This expansion will increase the combined solar capacity to 3.3 MW, contributing to the total energy requirement of approximately 5.90 MW. This initiative enables the Company to manage rising energy costs more effectively and enhance energy efficiency. The board of the Company is dominated by sponsors and in more of an execution role. The management of BTPL has an adequate delegation of authority matrix that needs improvement. The implementation of an ERP system remains critical for the sustainability of the control environment. BTPL is the sponsor's single line of business that reflects business concentration risk and adequate financial strength. BTPL's top-performing product is viscose yarn, followed by cotton yarn, polyester-cotton yarn, and polyester-viscose yarn. As part of its profit-driven business strategy, the Company has optimized its product mix by shifting towards the production of finer yarn counts. This strategic shift has extended the product lead conversion time while reducing total daily output due to the processing requirements of finer yarn manufacturing. This resulted in a reduction in sales during 1HFY25 which stood at PKR 2,320mln (1HFY24: PKR 3,017mln, FY24: PKR 5,524mln). However, the margins of the Company have slightly increased mainly on the back of improved product pricing during 1HFY25 in comparison with FY24 despite the increase in operating expenses to sales ratio. The Company's sponsors are exploring new investment avenues within the textile value chain to augment business sustainability. The Financial risk profile of the Company is considered adequate with a slightly stretched working capital cycle, moderately leveraged capital structure and net working capital requirements mainly met through short-term borrowings. The cashflows and coverages of the Company are maintained at an adequate level.
The ratings are dependent upon the management's ability to sustain their capacity utilization, generate sufficient cashflows, and maintain coverages at an optimal level. The corporate governance framework needs improvement. Adherence to the debt matrix at an adequate level is a prerequisite for the assigned rating.

About the Entity
Basfa Textile (Pvt.) Ltd, incorporated and operational since 2006, is engaged in the manufacturing and sale of Cotton and Viscos Yarn. Viscose yarn is sold under the brand name “Super-Diamond” and Cotton yarn under the brand name “Super-Gold”. Mr. Babar Jahangir the CEO/Chairman of the Company holds 44.4% shareholding and the remaining stake vests with Mr. Ahmed Jahangir (30.0%) and Mr. Fahad Jahangir (25.6%). The board comprises three family members; Mr. Babar Jahangir, Mr. Ahmed Jahangir, and Mr. Fahad Jahangir. Mr. Babar Jahangir has been with the Company since 2008. His innovative technological skills in the field of the textile sector bring specialized and comprehensive knowledge to the board.