Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its ratings for Din Textile Mills Limited (DTML) at ‘A-‘ for the long term and ‘A2’ for the short term, reflecting a stable outlook. This decision comes as the company continues to diversify its operations, incorporating more sustainable energy sources and expanding its product line, despite facing increased production costs and shifting market demands.
According to The Pakistan Credit Rating Agency Limited, the ratings affirmation reflects DTML’s robust position in the textile industry, supported by its diversified business operations and strong client base. The company has reported a significant increase in revenue to PKR 29.6 billion during the first nine months of FY24, up from PKR 23.0 billion in the same period last year, primarily driven by increased local sales.
DTML has strategically shifted its focus within its knitwear yarn category from exports to local markets to capitalize on better pricing and margin opportunities. This shift comes alongside the company’s efforts to manage escalating production costs, which have risen due to higher raw material prices and increased energy tariffs. In response, DTML has invested in solar energy projects, with a 3.5MW completed and a 4.5MW installation underway, financed through subsidized loans from the State Bank of Pakistan.
The company is also adapting to global changes in demand for yarn and greige fabric by entering the value-added segment, including towels and the export made-up market, through toll manufacturing and initiating a stitching segment with minimal capital expenditure. This strategy aims to diversify revenue streams and enhance the company’s sustainability profile.
PACRA’s ratings also consider the financial risk profile of DTML, noting slight improvements in coverage ratios and cash flows. The company’s capital structure remains leveraged but is supported by the sponsor’s commitment to financial backing and expected equity injections to bolster DTML’s financial health.