Gul Ahmed Textile Mills Limited

CREDIT RATING REPORT | Mar-25

Logo
Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
07-Mar-25 AA- A1 Stable Maintain -
07-Mar-24 AA- A1 Stable Maintain -
07-Mar-23 AA- A1 Stable Upgrade -
07-Mar-22 A+ A1 Stable Upgrade -
07-Sep-21 A A1 Positive Maintain -
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.

Rating Rationale

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.

Key Rating Drivers

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.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Gul Ahmed Textile Mills Limited

rating analysis

Logo
Profile
Legal Structure

Gul Ahmed Textile Mills Limited ("GATM" or "the Company") has been operating in Pakistan since 1953 and is listed on the Pakistan Stock Exchange.


Background

Gul Ahmed Textile Mills Limited was incorporated in Pakistan on 1st April 1953 as a private limited Company and subsequently converted into a public limited Company on 7th January 1955. The Company is a subsidiary of Gul Ahmed Holdings (Pvt.) Limited. GATM is a flagship Company of the group.


Operations

GATM is a vertically integrated textile Company with operations broadly divided into five main segments: Spinning, Weaving, Apparel, Home Textiles, and Retail, with all segments operating as separate profit centers. The retail segment was demerged from Gul Ahmed in 2021. The Company's presence in the retail segment—through a wholly owned subsidiary—"Ideas" in the local market adds up to a stronger business risk profile. The Company's energy requirement stands at 45MW, which is primarily met through Gas, HFO, Diesel, and K-Electric. The Company's registered office is situated at Plot No. H-7, Landhi Industrial Area, Karachi.  


Ownership
Ownership Structure

The Company's ownership structure is primarily controlled by its holding company, which holds a majority stake of ~55.85%, signifying substantial influence over strategic decisions. Associated entities collectively own ~13.02%,. Financial Institutions hold ~7.90%, while Investment Companies & Mutual Funds own ~5.17%, indicating market confidence and professional fund management involvement. Individuals account for 16.30%, contributing to liquidity but also potential market volatility. The remaining 1.42% is collectively held by Insurance Companies, Modaraba Companies, Charitable Institutions, and Government Departments, showcasing diversified participation


Stability

The Company demonstrates strong ownership stability, with the second generation of the business fully engaged in its operations. This continuity ensures the preservation of the founding vision while integrating modern strategic approaches. The presence of a holding company strengthened the ownership matrix of the Company.


Business Acumen

The Bashir family possesses a wealth of experience spanning ~7 decades in the textile industry. The intimate knowledge of textile mill operations, coupled with their exceptional skills in the strategic planning and policy formulation, positions them as one of the prominent industry leaders.


Financial Strength

Ideas (Pvt.) Limited, a subsidiary of GATM,  operates in the textile retail segment, contributing PKR 29bln to the Company's consolidated topline of PKR 172.5bln as of FY24. The Company's strong financial position is reinforced by its consolidated figures and robust corporate background, reflecting stability and sustained growth potential. 


Governance
Board Structure

The board comprises seven members (six male directors, and one female director) including the CEO and Chairman. The Company's board structure reflects strong family representation, with four out of seven members belonging to the sponsoring family, while two are independent directors. The inclusion of independent oversight has strengthened the governance matrix of the Company.


Members’ Profile

Mr. Mohomed Bashir – Chairman of the Group – is a business veteran entrusted with various honorary consular positions by the Government of Pakistan. He also serves on the Board of various other companies. Mr. Zain Bashir, the Company's Vice Chairman, is a certified director from Pakistan Institute of Corporate Governance (PICG), and is associated with the Company since 1997. His extensive association with the textile sector has provided him with in-depth industry knowledge. The other Board members also possess diversified experience and reasonably long association with the Company. 


Board Effectiveness

GATM has established two board committees, Audit Committee, and Human Resource and Remuneration Committee, aiding in the board effectiveness. During FY24, four meetings of the board of directors were held to evaluate the Company's overall performance towards its targets. The minutes of those meetings have been formally documented.


Financial Transparency

The Company has appointed BDO Ebrahim & Co. Chartered Accountants as its internal auditor, replacing Grant Thornton Anjum Rahman Chartered Accountants. KPMG Taseer Hadi & Co. served as the external auditor for the previous financial year, issuing unqualified opinions on the financial statements for the year ended June 30, 2024.  For the current financial year, Yousuf Adil Chartered Accountants has been appointed as the new external auditor. The auditor has issued a unmodified conclusion for the half year ended December 31, 2024. Both auditors are listed in the ‘A’ category of the State Bank’s panel.


Management
Organizational Structure

The business profile is structured into distinct divisions, each led by dedicated managers, ensuring effective oversight and operational efficiency. The Company's operations are segmented into five key areas: i) Spinning, ii) Weaving, iii) Apparel, iv) Home Textiles, and v) Retail. The respective segment managers report directly to the CEO, fostering streamlined decision-making and reinforcing a lean organizational structure.


Management Team

Mr. Mohammed Zaki Bashir joined Gul Ahmed Textile Mills Limited in 2005 and became a Board member in 2008. He currently serves as the Chief Executive Officer, leading the Company’s strategic and operational initiatives. He holds a graduate degree from Regents Business School, UK. He is also a member of the Executive Committee of APTMA and has been part of the Entrepreneurs Organization since 2014.


Effectiveness

The functions of the management are defined clearly to effectively achieve its underlying goals and objectives. Further, weekly one-to-one meetings are held with all departmental heads where the performance of each department is discussed at length. However, establishment of committees will augment the management framework of the Company. 


MIS

The Company has deployed Oracle EBS 12.1 and Microsoft Dynamics as ERP solutions, used by Ideas (pvt.) limited which integrate the company's business functions and help the management in timely decision-making. The company has implemented a SCADA system in its manufacturing unit to enhance automation and efficiency. Meanwhile, Microsoft Dynamics Cloud has also been successfully implemented in the retail segment.


Control Environment

The Company’s monthly MIS includes detailed segment-wise and unit-wise performance reports, regularly reviewed by senior management. The Company holds multiple internationally recognized certifications, ensuring compliance with global standards. The Company maintains valid certifications for its products and facilities, which undergo periodic audits by leading certification bodies, including SA 8000:2014, ISO 9001:2008, Oeko-Tex Standard 100 (Apparel and Home Textile Class I & II), GOTS, OCS, and several others.


Business Risk
Industry Dynamics

The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. During 6MFY25, the textile exports stood at USD 9.1bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry


Relative Position

Gul Ahmed Textile Mills Limited (GATM) is one of the largest vertically integrated textile units in the country. The Company holds a strong market position, ranking among the top five textile exporters. It operates as one of the leading player within the industry, reinforcing its standing in the overall textile landscape.


Revenues

The majority of the sales revenue for the Company comes from direct export sales, which account for 69.9% of total sales revenue. Exports largely comprise home textiles and apparel while yarn, fabric, and retail clothing are sold locally. Majority of the Company’s exports are to Germany (30%), the United States (14%), United Kingdom (11%), and Italy (9%). Geographically, the concentration of revenues is moderately diversified. During FY24 the Company’s top line improved to PKR 143bln, a growth of 27% (FY23: PKR 112bln). Furthermore, during 2QFY25 the topline stood at PKR 81.6bln (2QFY24: PKR 69.1bln).


Margins

During FY24, the gross profit margin stood at 12% (FY23: 14.9%). The operating margin witnessed a decline to 7.3% (FY23: 9.9%), owing to the increase in operating expenses to PKR 6.7bln (FY23: PKR 5.6bln). The Company’s finance cost increased to PKR 5.4bln (FY23: PKR 5.3bln). Hence, the net profit of the Company clocked at PKR 4.7bln (FY23: PKR 3.9bln) with net margin clocked at 3.3% (FY23: 3.6%). During 2QFY25, the gross margin of the Company recorded 9.6%, and the net profit margin stood at 1.2% with profit after tax clocking at 1bln (2QFY24: PKR 1.3bln). 


Sustainability

Looking ahead, the Company aims to enhance cost efficiency and improve margins by strategically reducing energy expenses. To mitigate the impact of rising energy costs—a key risk to its cost structure—the Company is integrating solar power into its energy mix. The installation of 17.2MW of solar panels is currently in progress. The Company is also considering the installation of an additional 10-15 MW of solar capacity across its various lands, along with a significant battery storage system. This is in addition to evaluating a Biomass Co-generation plant to help mitigate the impact of rising gas prices, reinforcing its commitment to sustainable and cost-effective operations. The Company's focus will remain on enhancing profitability through a diverse approach aimed at improving operational efficiency and financial sustainability.


Financial Risk
Working capital

A significant portion of the working capital cycle is the inventory turnover period, which stood at 110 days as of end-Dec'24 (end-Jun'24: 112 days; end-Jun'23: 119 days) owing to the procurement of cotton while finished inventory levels remained high to cater to international orders and local demand. The net working capital cycle stood at 142 days ( end-Jun'24: 143 days; end-Jun'23: 170 days). The Company’s short-term trade leverage stood at 25.1% as of end-Dec'24 (end-Jun24: 29.9%; end-Jun23: 37.3%). 


Coverages

GATM’s cash flows mainly depend upon the seasonality of the cotton procurement, and other factors. The Company has been able to generate positive cash from operations due to adequate working capital management. During FY24, free cash flow from operations (FCFO) clocked to PKR 21.2bln (2QFY25: PKR 5.8bln, FY23: PKR 17.6bln). During FY24, the interest coverage clocked to 3.3x (2QFY25: 2x, FY23: 2.6x) and debt coverage stood to 1.9x (2QFY25: 1.3x, FY23: 1.5x).


Capitalization

GATM operates with the highly leveraged capital structure (2QFY25: 59.1%, FY24: 57.2%). Out of the total debt, 75.5% (FY24: 70%) of the debt comprises short-term borrowings. The equity base of the Company recorded good growth to PKR 45.8bln as of end-Dec'24 (end-Jun'24: PKR 44.7bln; end-Jun23: PKR 40bln).
 
 

Mar-25

www.pacra.com

Gul Ahmed Textile Mills Limited

financial summary

(PKR mln)

Logo

Dec-24
6M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 49,617 50,233 50,361 46,118
2. Investments 570 71 70 70
3. Related Party Exposure 3,521 3,521 3,521 3,521
4. Current Assets 87,662 82,663 69,514 68,417
a. Inventories 49,188 49,014 38,450 34,430
b. Trade Receivables 27,908 24,567 23,422 25,583
5. Total Assets 141,370 136,488 123,466 118,127
6. Current Liabilities 28,857 31,061 29,123 20,882
a. Trade Payables 11,298 12,398 10,708 6,996
7. Borrowings 66,065 59,934 53,554 59,404
8. Related Party Exposure 203 217 131 69
9. Non-Current Liabilities 481 524 587 1,638
10. Net Assets 45,765 44,753 40,071 36,133
11. Shareholders' Equity 45,765 44,753 40,071 36,133
B. INCOME STATEMENT
1. Sales 81,637 143,146 111,968 100,257
a. Cost of Good Sold (73,772) (125,955) (95,272) (82,889)
2. Gross Profit 7,865 17,191 16,695 17,368
a. Operating Expenses (3,990) (6,719) (5,629) (4,178)
3. Operating Profit 3,875 10,472 11,066 13,189
a. Non Operating Income or (Expense) 907 1,492 231 (51)
4. Profit or (Loss) before Interest and Tax 4,782 11,964 11,297 13,138
a. Total Finance Cost (3,390) (5,426) (5,348) (2,669)
b. Taxation (380) (1,810) (1,963) (1,607)
6. Net Income Or (Loss) 1,012 4,728 3,986 8,862
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 5,766 21,215 17,659 15,168
b. Net Cash from Operating Activities before Working Capital Changes 1,617 14,691 13,716 13,212
c. Changes in Working Capital (5,571) (10,616) 2,554 (9,627)
1. Net Cash provided by Operating Activities (3,954) 4,075 16,269 3,585
2. Net Cash (Used in) or Available From Investing Activities (2,130) (3,889) (7,931) (10,736)
3. Net Cash (Used in) or Available From Financing Activities 238 (3,540) (9,406) 12,590
4. Net Cash generated or (Used) during the period (5,847) (3,354) (1,068) 5,439
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 14.1% 27.8% 11.7% 27.3%
b. Gross Profit Margin 9.6% 12.0% 14.9% 17.3%
c. Net Profit Margin 1.2% 3.3% 3.6% 8.8%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 0.2% 7.4% 18.1% 5.5%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 4.5% 11.1% 10.5% 28.0%
2. Working Capital Management
a. Gross Working Capital (Average Days) 168 173 199 252
b. Net Working Capital (Average Days) 142 143 170 229
c. Current Ratio (Current Assets / Current Liabilities) 3.0 2.7 2.4 3.3
3. Coverages
a. EBITDA / Finance Cost 2.6 5.0 4.1 7.6
b. FCFO / Finance Cost+CMLTB+Excess STB 1.3 2.7 2.3 2.7
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 2.8 1.1 1.8 1.8
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 59.2% 57.3% 57.2% 62.2%
b. Interest or Markup Payable (Days) 42.0 112.6 122.0 103.8
c. Entity Average Borrowing Rate 9.4% 7.9% 7.9% 3.9%

Mar-25

www.pacra.com

Gul Ahmed Textile Mills Limited

rating scale

Logo

Mar-25

www.pacra.com

Gul Ahmed Textile Mills Limited

regulatory disclosure

Logo
  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Mar-25

www.pacra.com