PACRA Maintains Entity Ratings of Ali Embroidery Mills (Private) Limited

The ratings of Ali Embroidery Mills (Private) Limited (Ali Embroidery) reflect its sustained business profile. The Company is a family-owned private limited company that operates with 30 Schiffli and 108 Multi-head embroidery machines. The embroidery industry consists of several players operating on a small scale with informal structures. However, Ali Embroidery has a tiered organizational structure with good operating capacity. The ratings mirror the company's enduring business profile, showcasing consistent enhancements in its revenues, equity, and asset base throughout the years. During FY23, the company's topline reflected growth to PKR 1.5bln (FY22: PKR 1.2bln). The company has witnessed an increasing trend of customer sales, the majority of the revenues are generated from related parties, while the rest of the customer base has also contributed over the years. Throughout this period, there has been a slight decrease in both gross profit and operating profit margin, whereas the net profit margin has demonstrated improvement. Ratings also incorporate adequate financial risk manifested by suitable working capital management and coverages. During FY23 the country's textile exports decreased to $16.5bln, reflecting a 15% YoY decline. This decline was attributed to factors such as high energy costs, cotton shortages, and foreign exchange rate uncertainties. Value-added products like knitwear, bedwear, towels, and readymade garments witnessed a 13% YoY decline, while basic textiles, including raw cotton, cotton yarn, and cotton cloth, experienced a 21% YoY decrease. Notably, in June 2023, there was a 7% MoM increase in cotton yarn exports, and value-added exports depicted a volumetric increase of 16% on an MoM basis. Knitwear and readymade garments witnessed an 18% and 19% increase, respectively.
The ratings are dependent on the management’s ability to uphold the entity’s performance trend. Meanwhile, maintaining strong margins and coverages to fulfill financial obligations will remain critical. Improvement in the governance framework is considered important.

About the Entity
Ali Embroidery Mills (Private) Limited (Ali Embroidery) was incorporated in Pakistan in 1972 as a private limited Company. Ali Embroidery is part of the Sefam Group of Industries headquartered in Lahore, Pakistan. The group takes pride in claiming themselves as the pioneers of introducing the concept of brands in Pakistan. Ali Embroidery was set up by Mr. J.A Zaman (late) and later became the launching pad for Sefam (Private) Limited and Sarena Textile Industries. The Company was initially engaged in doing Schiffli embroidery for the local wholesale market. M/s Arshad Raheem & Co. Chartered Accountants are the external auditors of the Company. They have expressed an unqualified opinion on the financial statements of the Company for the year ended June 30, 2023.