PACRA Maintains Entity Ratings of US Denim Mills (Pvt.) Limited

The rating emanate from the prominent profile of US Denim Mills (Private) Limited (“UDML”, or “the Company”) in the weaving industry of Pakistan and is one of the textile ventures of the US group. The rating takes comfort from the presence of AJ Holding Limited as a sponsoring group and two Companies primarily operate under its umbrella which includes US Apparel & Textiles (Pvt) Limited & US Denim Mills (Private) Limited. The sponsors exercise oversight over individual enterprises, oversee professional management, and are well-equipped and experienced. Strategic direction is meticulously worked out and rigorously followed once decided and finalized. The Company’s management has experienced professionals, aided by comprehensive reporting, where operations of the Company are supervised with complete autonomy. US Denim has a subsidiary in Turkey,with name of Us Fashion Turkey Tekstil Ticaret Anonim Sirketi to augment accessibility in international markets by exploring multiple export avenues mainly in Europe. The Company product slate is dedicated to denim fabric with quality yield derived ranges from 07 to 12 yarn count. The top line of the Company stood at PKR 22bln during FY23 (FY22: 23bln) predominately stemming from indirect exports, constituting 68% of its total revenue and 30% from direct exports to multiple destinations including Bangladesh, Sri Lanka, Egypt, Morocco, Turkey & Italy etc. The margins of the Company have shown a notable upswing during FY23, based on pricing competitiveness which depicts a strategic shift by international manufacturers as they enacted a close-to-needle approach. In recent times, the Company has shifted their energy mix to boilers to manage energy cost risk. US Denim maintain a favorable capital structure, sufficient cashflows and strong coverages signifying a robust financial profile. The Company has planned CAPEX for backward vertical integration in the spinning segment. The management of the Company is mindful to keep align their performance with financial projections.
During FY23, the size of the textile industry stood at PKR 2.9trn mainly supplemented by PKR 1,584bln from composite and garments, and PKR 775bln from spinning and PKR 637bln from weaving. The weaving industry has 9,000 looms in working with an export cotton cloth volume of 2,012mln Sq. Meter and amount of PKR 499bln. The availability of raw materials like cotton yarn, inflated finance costs and energy tariffs are prime challenges specific to the industry.
The ratings are dependent on the Company’s ability to maintain a strong business profile amidst current circumstances while continue to generate sufficient cashflows, stable topline and profitability. The adherence of debt matrix at an optimal level and maintaining sound coverages remain vital for assigned ratings.

About the Entity
US Denim (Private) Limited (US Denim, The Company) was incorporated on January 18, 2005 as a private limited company. The Company is principally engaged in the manufacturing and sale of denim fabric The company has a weaving unit with 229 air jet looms and 20 power looms. AJ Holding (Private) Limited holds 100% shareholding of US Denim. KPMG Taseer Hadi & Co. Chartered Accountants is the external auditor of the Company. The auditor has expressed an unqualified opinion on the financial statements ending Jun 30, 2023.
The Company has a ten-member board with the presence of sponsors and their families. The position of CEO is vested with Mr. M. Irfan Nazir Ahmed. He carries twenty-five years of professional experience and is an MBA. Mr. Farrukh, CFO of the Company, has been associated since the year 2001. He is a Chartered Management Accountant.