PACRA Maintains the Entity Ratings of Sefam (Pvt.) Limited

Following the carve-out of several prominent brands, Sefam (Pvt.) Limited (“SPL” or “the Company”) has embarked on a strategic brand-building journey, focused on revitalizing its remaining portfolio, enhancing in-house labels, and expanding its retail footprint to deepen customer engagement and reinforce its market presence. Two prominent brands, Kayseria (KY) and Leisure Club (LC), primarily operate under the umbrella of SPL. KY is the flagship in-house brand of SPL, focusing on unstitched and ready-to-wear women’s clothing. On the other hand, LC offers Western-style casual and semi-formal wear, primarily targeting kids, youth, and young adults. The Company has also introduced a third brand, Shahnameh, which specializes in Eastern wear for men and currently operates as part of LC. The Company has undergone a management overhaul, with the recruitment of a new CEO dedicated to the retail segment, along with other vertical heads, all of whom possess extensive experience in the retail industry, to ensure the existing brands' self-sustainability and drive the brand repositioning strategy. Over the past year, the closure of underperforming retail outlets reflects the implementation of this strategy. In 1HFY25, the Company recorded sales of PKR 2.8bln (FY24: PKR 5.4bln), with ~75.0% coming from KY and the remainder from LC. During 1HFY25, SPL generated ~16.0% of its sales through e-commerce. SPL's retail business is geographically spread, with approximately 39.0% of its outlets operating under a franchised model. The Company's management is committed to enhancing the feedback mechanism for these outlets as the digital landscape evolves, recognizing that customer experience is crucial for capitalizing on emerging opportunities. The Company maintains a healthy gross margin (1HFY25: 47.3%, FY24: 41.2%) but continues to face pressure from elevated operating costs, which have resulted in significant dilution in net margins. However, the Company's management is gradually rationalizing operating expenses, as reflected in the improvement in operating profits during 1HFY25. The group companies are SPL prime suppliers, which augment their supply chain matrix. The financial risk profile of the Company is considered adequate with a stretched working capital cycle. The working capital requirements of the Company are primarily met through long-term loans from sponsors with no predefined timeline for repayment and remaining from conventional borrowings. The management plans to unload SPL’s debt and deleverage its balance sheet by the end of 1QFY26. The cash flows and coverages of the Company are considered adequate and need improvement. The Company currently maintains a negative equity position, which is expected to improve through profit generation in the upcoming quarters. The fashion retail sector has become increasingly competitive, as reflected in the emergence of several new brands.
The ratings are dependent upon the management’s ability to improve profitability, generate sufficient cash flows, and maintain coverages at an optimal level. The Corporate governance framework needs improvement.

About the Entity
Sefam (Pvt.) Limited, incorporated in 1989, offers a comprehensive range of Western and Eastern wear for men, women, and children. The Company's leadership is anchored by Mr. Hamid Zaman and Mr. Tariq Zaman, who serve as directors. Mr. Hamid Zaman holds the majority shareholding with an 83.18% stake, while Mr. Tariq Zaman and Ms. Ambreen each hold an 8.41% share. Last year, the Company welcomed Mr. Yameen Malik as CEO of Sefam, who brings more than thirty years of retail industry experience.