PACRA maintains Entity Ratings of Gul Ahmed Textile Mills Limited

The assigned rating reflects Gul Ahmed Textile Mills Limited's ("the Company" or "GATM") long and rich operating history and its emergence as one of Pakistan's leading players in the highly competitive textile landscape. GATM is the flagship company of the Gul Ahmed Group, operating as a fully vertically integrated textile unit that covers all aspects of the textile value chain. The Company boasts a state-of-the-art manufacturing facility equipped with the latest machinery and cutting-edge production mechanisms, ensuring high-end international standards with significant process automation. The Company's product portfolio comprises yarn, dyed yarn, fabric, bleached fiber, home textiles, and apparel. In the product- and business-vertical performance analysis, home textiles hold an apex position in the company's valuation matrix in terms of business contribution, while the spinning segment leads in profitability generation. GATM's export sales have shown consistent growth in USD terms over the last three years, reaching USD 361mln in FY24 (FY23: USD 293mln), securing the fourth position among the top 100 textile exporters in Pakistan. During 1HFY25, the Company generated revenue of PKR 81.64bln (FY24: PKR 143.15bln), ~69.67% contributed by direct export sales. GATM's sales to Germany and the United Kingdom experienced significant growth compared to the previous year, primarily driven by a substantial increase in home textile product sales, amounting to approximately PKR 22.5bln. The key factors influencing the company's cost structure and profitability matrix include USD exchange rate stability, product price dynamics, rising energy tariffs, revision of minimum wage, escalating finance costs, and an increased tax burden resulting from the transition of export-oriented units from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR). GATM has recently undergone a strategic shift in its business approach, prioritizing profitability over mere top-line growth. To achieve this, the company's top management independently assesses and analyzes the performance of each business vertical. Secondly, the company is rationalizing its order pricing criteria in USD terms, prioritizing high-contribution margin products, and strategically phasing out low-contribution margin products. To manage energy costs, GATM has invested in a 19-megawatt solar power plant through long-term conventional borrowings. Of this capacity, 2MW has been installed, while the remaining capacity is expected to be commercialized by the end of June 2025. Ideas (Pvt) Limited is the retail arm of the Gul Ahmed Group, a premium fashion and lifestyle brand. The management's focus is on consolidating retail outlets to optimize operating costs and converting them into experience stores to enhance customer experience. The fashion retail sector has become increasingly competitive, as reflected in the emergence of several new brands. The Financial risk profile of the Company is considered adequate with stretched working capital management and a dip in coverages. The Company maintained a high-leverage capital structure dominated by short-term borrowings.
The ratings are dependent on the Company's ability to augment its business risk profile through improvement in the profitability matrix. The improvement in margins and coverages while expanding business volumes remains critical.

About the Entity
GATM is listed on PSX and commenced operations in 1953. The majority shareholding lies with Gul Ahmed Holdings (Pvt.) Limited (~55.86%). The Board comprises seven directors including four members of the sponsor's family, one non-executive, and two independent directors. The CEO, Mr. Mohammed Zaki Bashir, oversees the Company's affairs.