PACRA Maintains the Entity Ratings of Alhamd Corporation (Pvt.) Limited

The ratings of Alhamd Corporation (Pvt.) Limited (“ACL” or “the Company”) reflect its adequate positioning within Pakistan’s spinning industry. The principal activity of the Company entails the manufacturing and sale of various categories of yarn. ACL’s product portfolio includes PC, CVT, CT, and combed yarn. The sales mix remains largely concentrated in the local market, with a relatively modest contribution from exports. ACL operates in a challenging industry environment. Pakistan’s spinning sector continues to operate under a stressed environment characterized by persistent margin compression, elevated energy tariffs, and high cotton procurement costs. Despite a modest recovery in yarn production during FY25, sector profitability has remained negative, with yarn exports declining ~30% YoY basis in PKR value. The withdrawal of concessional energy tariffs and revision in the tax regime have further intensified cost pressures, while elevated leverage and interest coverage below ~2.0x reflect constrained financial flexibility across the segment. Although recent policy rate easing and amendments in import duties may provide gradual relief, the sector remains exposed to raw material price volatility, energy supply disruptions, and intense regional competition, keeping the near-term outlook cautious. Within this backdrop, during FY25 and 1QFY26, the Company sustained its focus on coarser yarn counts in line with prevailing demand dynamics. However, the topline contracted, reflecting a decline of ~11.4% during FY25 and a ~33% in the first quarter of FY26. Lower volumes and pricing pressures translated into a decline in gross margins, resulting in operational contraction during the year and losses for the first quarter of FY26. Sustained Elevation in finance costs, amid a leveraged capital structure and sizable working capital borrowings, continued to weigh on the bottom line. Consequently, the Company reported net losses for year end and the preceding first quarter. Energy and other input costs further constrained margin recovery. The funding mix comprises short-term conventional borrowings, constituting ~40% of total borrowings, while the remaining portfolio includes long-term borrowings from financial institutions and subsidized facilities from SBP, along with sponsor support. The capital structure remains leveraged, with a stretched working capital cycle at ~125 days (1QFY25: ~97 days). The coverages are subdued, with EBITDA to finance cost at ~1.1x. Going forward, management expects gradual improvement in operational performance through stabilization in demand and cost rationalization initiatives, including the planned ~8.5 MW solar project.
The ratings remain dependent upon the Company’s ability to restore profitability, generate sufficient cash flows, strengthen coverages, and maintain its financial risk profile at an adequate level.

About the Entity
Alhamd Corporation (Pvt.) Limited was incorporated in 1983 as a private limited company. The Company operates a manufacturing facility in Dera Ghazi Khan, one of Pakistan’s prominent cotton-growing regions, which provides strategic proximity to key raw material sources. The majority shareholding (~74%) is held by Mr. Sheikh Afzaal Ahmed, while his son, Mr. Asad Imdad Sheikh, holds ~25% of the Company’s equity. The Board comprises three members, including two representatives from the sponsoring family—Mr. Sheikh Afzaal Ahmed and Mr. Asad Imdad Sheikh—while the remaining position is held by an executive director.