PACRA Maintains the Entity Ratings of US Denim Mills (Pvt). Limited

US Denim Mills (Pvt). Limited (“UDML” or “the Company)” is a recognized name in Pakistan’s weaving industry. Operating within the fabric vertical of the US Group, the Company has established its position as a leading denim fabric manufacturer, catering to the top international clientele. This is underpinned by its cutting-edge production capabilities and stringent quality control measures. Over the years, the Company’s topline has demonstrated steady growth in business volumes, supported by enhanced geographical presence with its offices in the US and Turkey.

Indirect exports remain the primary revenue contributor, with a significant portion derived from inter-group (captive) business. The Company’s revenue base moderated marginally (FY25: PKR 27.8bln; FY24: PKR 29.6bln) primarily due to product pricing challenges, following the imposition of US reciprocal tariffs alongside intense competition from the regional players. While there was upward push in the cost, the market conditions did not allow sale prices to be revised upwards. Strategically, the Company continues to prioritize a profit-centric approach rather than relying solely on volumetric expansion. The gross profit margin was compressed, attributed to an inflated production cost. Key factors impacting the core profitability were expensive cotton procurement, elevated energy tariffs and a revision in wage rate. Deployment of surplus funds in bank deposits augmented the net profitability. However, this benefit was partially offset by the taxation expense, leading to a dilution in the bottom line (FY25: PKR 240mln; FY24: PKR 1.5bln).

The Company finances its working capital requirements primarily through internal cash generation and the subsidized EFS Scheme by the SBP. The sponsors have a conservative stance towards conventional debt, supporting a strong financial risk profile. The working capital cycle and coverages of the Company remain within a manageable range. On the sustainability front, the management intends to improve the operational efficiency through BMR in its existing manufacturing facility.
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The ratings are contingent on the Company’s ability to sustain a strong business profile amid current market conditions, while generating adequate cash flows, maintaining a stable topline, and preserving profitability. Any deterioration in the financial risk profile will have a negative impact on the assigned ratings.

About the Entity
US Denim Mills (Pvt). Limited is a private limited Company incorporated on January 18, 2005. The Company operates under the umbrella of AJ Holdings (Pvt). Limited. The operational infrastructure comprises a weaving unit with 229 air jet looms and 20 power looms. The overall control of the board rests with ten-members from the sponsoring families. The position of CEO is vested in Mr. M. Irfan Nazir Ahmed. He has twenty-nine years of professional experience and holds an MBA qualification.