PACRA Maintains Entity Ratings of Kohat Textile Mills Limited

Kohat Textile Mills Limited ("Kohat Textile" or "the Company") is a listed spinning concern and the first textile venture of the Saif Group ("the Group"), a diversified conglomerate with investments spanning energy, textiles, healthcare, technology, and real estate. Kohat Textile manufactures specialized yarn comprising polyester, viscose, acrylic, and blended varieties. The ratings draw strength from the Company's established operating track record, strategic importance within the Group's textile platform, and demonstrated ability to navigate varying industry cycles. During FY26, the Company completed a Balancing, Modernization and Replacement (BMR) initiative involving the installation of imported machinery and replacement of selected legacy equipment, increasing installed spindle capacity from ~44,508 to ~46,908 spindles. The upgraded capacity became operational during the year and is expected to support operating efficiency and production flexibility over time. The Company remains predominantly focused on the domestic market. During 9MFY26, sales increased to PKR ~6.3bln (9MFY25: PKR ~6.1bln), supported by stable demand and relatively improved yarn realizations. Profitability indicators exhibited further strengthening, with gross margin improving to ~16.1% (9MFY25: ~14.3%), while net margin increased to ~4.1% (9MFY25: ~3.8%). Margin improvement was supported by operational efficiencies, lower finance costs, and a continued focus on specialized yarn categories with relatively better value addition. The Company's energy profile has strengthened during FY25 through continued investment in renewable energy infrastructure. Solar capacity has expanded to approximately ~5.1MW against an average operating requirement of ~4.5–4.6MW. The resulting energy mix, comprising solar generation, grid electricity, and limited natural gas based backup generation, has reduced exposure to energy cost volatility and enhanced operating resilience within a sector where energy remains a key cost component. The financial risk profile remains adequate. As of Mar-26, the Company's equity base strengthened to PKR ~4.8bln (Jun-25: PKR ~4.6bln), supported by internal capital generation. Total borrowings stood at PKR ~3.7bln, translating into leverage of ~43.5%, broadly aligned with the Company's operating requirements. Coverage metrics improved, with EBITDA-to-finance cost increasing to ~2.8x (9MFY25: ~2.3x), benefiting from stronger earnings generation and a decline in the average borrowing rate to ~12.0% (Jun-24: ~20.4%). Liquidity remains manageable, although working capital intensity continues to be inherent to the spinning business model. The ratings also incorporate the Company's association with the Saif Group and the increasing coordination across the Group's textile operations, which provides support through shared oversight, technical expertise, and strategic alignment.
The ratings remain dependent upon the Company's ability to sustain profitability, preserve coverage indicators, and maintain leverage at levels commensurate with the current rating category. Sustained improvement in operating performance, continued strengthening of cash flow generation, and prudent management of working capital requirements will remain important rating considerations. Conversely, material deterioration in margins, weakening of coverage metrics, or a significant increase in leverage beyond projected levels may exert pressure on the ratings.

About the Entity
Kohat Textile Mills ("Kohat Textile" or "the Company") was incorporated in 1966 under the repealed Companies Ordinance,1984 and became commercially operational in 1967. As at end of 9MFY26, Kohat Textile's (~73.17%) ownership vests with Saif Group through Saif Holdings, followed by the general public (~15.24%), the financial institutions (~9.83%), and others (~1.76%). The Company's Board is chaired by Mr. Javed Saifullah Khan, while Mr. Assad Saifullah Khan heads the Company as the CEO.