PACRA Assigns Initial Entity Ratings to A.J. Textile Mills Limited

Business News English

Lahore, October 13, 2021 (PPI-OT): AJ Textile, a private limited company is a group concern of Aziz group – one of the oldest conglomerates, with business ventures in Textile (Yarn Production); FMCG (Match Manufacturing), Laminated Boards, MDF and Particles Chip Board Production. The Group has recently entered into Real Estate Sector with their first project (AJ Tower) under development in Islamabad. Over the years, since its commencement, the Company has expanded in to three units with installed capacity of 90,845 spindles, producing blended, cotton and plied yarns in Ring and Vortex spinning (equivalent to 15,000 spindles).

The Company has installed power generation capacity of 9 MW power plant and 1 MW Solar plant on its profile. The ratings incorporate the Company’s moderate yet improving business profile where the revenue is emanating from single segment. Further improvement in control environment remains vital. The management meetings are held regularly with follow-up points to resolve or pro-actively address operational issues, if any, eventually ensuring smooth flow of operations. During FY21, revenues and margins witnessed significant growth trend along with sizably improved profitability. The Company has moderately leveraged capital structure, maintained over the years.

The strengthening of equity base has enhanced the risk absorption capacity of the company. Coverages and cash cycle has improved during the period. Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20 due to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase. The probability of little attrition in demand remains on the horizon attributable to the outbreak of COVID-19 variants.

The ratings are dependent on improving business profile under the current economic conditions; and a strong financial profile with healthy coverage. Improvement in governance framework and inclusion of independent oversight remains essential. The ability to generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

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