Lahore, August 09, 2021 (PPI-OT):Al Rahim Textile Industries Limited (Al Rahim) is a family-owned textile company that enjoys strong position in towel manufacturing. The Company is primarily an export oriented towel manufacturing concern. Overall export volumes of towel industry inclined in FY21. During 1HFY21 towel exports stood at PKR~72bln (USD~446mln) as compared to PKR~59bln (USD~379mln) in 1HFY20. This exhibited a growth of ~23% in PKR terms. Meanwhile, there was ~9% growth in quantitative terms. Growth in towel sector was witnessed as Pakistan was able to attract export orders when regional players were struggling due to the pandemic and unable to meet demand.

During 1HFY21, the towel sector’s contribution to overall textile exports was ~6%. Meanwhile, contribution to total country exports was ~3%. Towel industry enjoys relatively better margins that are reflected in the Al Rahim’s profitability on the back of local cotton, which is more suitable for manufacturing towels. During 9MFY21, the top-line of the Company increased by ~64% mainly due to overall industry resumption and increasing demand in international markets of Europe and USA.

Moreover, the Company has completed its corporate transition phase where all assets, liabilities and business of sole proprietorship are transferred to the new corporate entity. The revenues are expected to follow upward trajectory due to higher demand in international markets i.e. Europe and USA. However, this could be disrupted by fourth wave of COVID-19 expected to emerge .The Company’s financial risk profile is characterized by moderate leveraging and strong coverages. Working capital cycle of the Company has improved due to prudent working capital management. The assigned ratings incorporate recent corporatization of the entity, experienced management team, and expected sponsor support as demonstrated historically.

The ratings are dependent on maintaining optimal operations and top-line amidst expected tough situation due to fourth wave of Covid-19. Sustaining margins and reducing customer concentration, while maintaining financial risk at low level is critical. Meanwhile, strengthening of governance framework for better oversight of strategic affairs is considered essential.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com