Ali Embroidery Mills (Private) Limited (“AEML” or “the Company”) was incorporated in Pakistan in 1972 as a private limited company under the repealed Companies Ordinance, 1984.

The Company is associated with the Sefam Group of Industries and East Gate Industries (Pvt.) Limited, headquartered in Lahore, Pakistan. AEML was originally founded by the late Mr. J.A. Zaman and represents one of the earliest organized ventures of the group, preceding the establishment of Sefam (Pvt.) Limited and Sarena Textile Industries (Pvt.) Limited. Over the years, the Company has developed into an established participant within Pakistan’s value-added textile segment, operating in the dedicated embroidery space that supports downstream garment manufacturing. With an operating history spanning more than five decades, AEML specializes in Schiffli and multi-head embroidery, supplying value-added fabric inputs to garment manufacturers.

The Company operates two production units located on Sheikhupura Road, Lahore, while its head office is situated on Waris Road, Lahore. As per management, AEML operates approximately 142 multi-head embroidery machines and 33 Schiffli embroidery machines, which have been running at high utilization levels, reflecting sustained order inflows. The Company is principally engaged in the manufacturing and sale of embroidered cloth, with sales primarily routed to related-party garment manufacturers. The Company’s total energy requirement is approximately 1.4MW. During the review period, AEML had installed solar capacity of around 1.3MW, with the remaining requirement sourced from LESCO. The investment in renewable energy has contributed to partial mitigation of grid-related energy cost volatility.

The Company is owned by the descendants of the late Mr. J.A. Zaman. Shareholding is primarily divided among family members, with Mr. Tariq Zaman, Mr. Hamid Zaman, Ms. Seema Aziz, and Ms. Ambreen Zaman each holding approximately 24.5% stake, while Mr. Ali Zaman holds a minority share of approximately 2%.

Ownership of the Company remains stable and concentrated within the founding family. The business continues to be managed by the second generation of the Zaman family, and no changes in the ownership structure were observed during the review period. The continuity of shareholding and long-standing family involvement provide stability to the Company’s strategic direction.

The sponsoring family possesses extensive experience in Pakistan’s textile and apparel sector. Mr. Hamid Zaman has been associated with Ali Embroidery Mills since its early years, working alongside the late Mr. J.A. Zaman, and played a key role in the establishment of Sefam and Sarena group companies. Mr. Tariq Zaman, the Chief Executive Officer, oversees the strategic and operational direction of the Company and brings considerable industry experience. The depth of sponsor involvement across group entities supports informed decision-making and operational continuity.

The sponsoring group has developed a diversified presence across Pakistan’s textile and apparel value chain, encompassing value-added manufacturing and fashion retail. AEML has remained a core operating entity within the group, contributing through its specialized embroidery operations. Over the years, the Company’s equity base has expanded through retention of profits. During FY25, improved operating scale and internal cash generation further supported the Company’s financial profile.

AEML operates under a three-member, sponsor-dominated Board of Directors, chaired by Mr. Hamid Zaman. The Board includes one executive director, Mr. Tariq Zaman, who also serves as the Chief Executive Officer. Governance oversight remains centralized with the sponsoring family, which is reflective of the Company’s closely held ownership structure. While the Board benefits from active sponsor involvement and sector expertise, the absence of independent representation limits formal external oversight.

Mr. Hamid Zaman, Chairman of the Board and Chief Executive Officer of Sefam (Pvt.) Limited, brings over four decades of experience in Pakistan’s textile sector and holds a degree from Utah State University, USA. Ms. Seema Aziz, Chief Executive Officer of East Gate Industries (Pvt.) Limited, also possesses more than 40 years of industry experience and is a graduate of Harvard Business School. The Board’s composition reflects deep sector knowledge and long-standing involvement across the group’s operating entities.

The Board does not convene formal meetings on a scheduled basis. Instead, strategic and operational matters are discussed on an informal and need-based basis, consistent with the Company’s sponsor-led governance style. No Board-level sub-committees have been constituted, indicating a relatively centralized decision-making framework.

M/s Arshad Raheem & Co., Chartered Accountants, serve as the Company’s external auditors. The firm holds a satisfactory Quality Control Review (QCR) rating from ICAP, though it is not rated by the State Bank of Pakistan. The auditors have expressed an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025.

The Company’s organizational structure is functionally aligned and comprises key departments, including Production, Marketing, Finance, Procurement, Administration, Inventory Management, Mechanical, Electrical, Human Resources, and Quality Assurance. This structure supports operational coordination across manufacturing, sales, and support functions.

Mr. Tariq Zaman, Chief Executive Officer, holds an MBA degree from LUMS and possesses extensive experience in Pakistan’s textile sector. Mr. Hafiz Umair Nadeem serves as the Chief Financial Officer of the Company. Design and sales functions are overseen by the General Manager Marketing, Mr. Shafqat Khan, while production and administrative operations are managed by the General Manager Factories, Mr. Mubashir Abdali. The management team comprises individuals with relevant sector experience, supporting continuity in day-to-day operations.

Management effectiveness is supported through periodic review of MIS reports at varying frequencies. Financial position and sales performance are monitored regularly by senior management, while production efficiency for multi-head embroidery machines is tracked on a real-time basis. Enhancement of monitoring systems for Schiffli machines through the FPS platform is expected to further strengthen operational oversight.

The Company utilizes Sidat Hyder (GL Module) as its core financial accounting system, implemented in December 2017 through D-Biz Solutions (Pvt.) Limited. In addition, AEML has developed and deployed in-house systems, including the Factory Production System (FPS), which supports billing management and monitoring of fabric flow for multi-head embroidery machines.

The control environment is primarily operational in nature, with quality assurance embedded within production processes. Primary customers conduct independent quality assessments of supplied products, which provides an external check on output standards. Internal controls remain management-driven, with scope for further formalization over time.

Pakistan’s textile exports improved during FY25, supported by gradual normalization in global demand and easing domestic financial conditions. Sector exports increased to USD ~17.3bln in FY25 (FY24: USD 16.7bln), reflecting a recovery led primarily by value-added segments, including garments and home textiles. The operating environment remained constrained by elevated energy tariffs and the full-year impact of the Normal Tax Regime, which has structurally altered post-tax profitability for export-oriented units. However, the progressive decline in policy rates during FY25 provided partial relief to financing costs, improving cash-flow dynamics across the sector. Overall, industry conditions during FY25 reflected a shift towards stabilization, with performance increasingly dependent on product mix, export orientation, and energy efficiency.

AEML operates in the industrial embroidery segment, a fragmented yet specialized niche within Pakistan’s value-added textile value chain. While modest in scale relative to large composite exporters, the Company is an established participant in the domestic embroidery space, supplying embroidered fabric to downstream garment manufacturers. Its operating relevance is underpinned by specialized capacity, long-standing relationships within the group’s apparel ecosystem, and sustained utilization of its embroidery assets.

During FY25, the Company reported revenue of PKR 2.67bln (FY24: PKR 2.16bln), reflecting continued scale-up supported by favorable pricing amid stable production volumes. The revenue profile remains concentrated, with sales primarily routed to related-party garment manufacturers. No meaningful client diversification was observed during the review period, and revenue growth largely mirrored the expansion and operating performance of associated entities. While this integrated structure supports order visibility and capacity utilization, it links AEML’s growth trajectory to the performance and expansion plans of its related counterparties.

Profitability improved in absolute terms during FY25, with gross profit increasing to PKR 409.2 million (FY24: PKR 342.3 million) and net profit rising to PKR 100.5 million (FY24: PKR 60.9 million). Margin performance remained broadly stable during the year, as the gross margin edged down marginally to approximately 15.3% (FY24: 15.8%), while the net margin improved to around 3.8% (FY24: 2.8%). The marginal movement in gross margins primarily reflected elevated raw material and energy costs, which were partially mitigated through operating efficiencies and selective cost pass-through.

The Company’s investment in energy optimization remains a key structural mitigant. During FY25, AEML operated with installed solar capacity of approximately 1.3MW against total requirements of around 1.4MW, reducing exposure to grid-related cost volatility. While this has supported margin defense, profitability remains sensitive to broader input cost movements and pricing discipline within the value chain.

AEML’s working capital profile remains stretched, reflective of the nature of the embroidery business and its role within the group’s integrated supply chain. During FY25, internal cash generation improved, supported by scale-up in operations and disciplined working capital management. Inventory and receivable levels remained aligned with production requirements and billing cycles of related counterparties, while payable days remained limited, consistent with the Company’s procurement structure. Overall, the net working capital cycle continues to exert pressure on liquidity, albeit partially mitigated by predictable order flows.

The Company’s cash flow profile strengthened during FY25, with Free Cash Flow from Operations increasing to PKR 279mln (FY24: PKR 237mln), supported by improved operating scale and cash conversion. Improved internal cash generation translated into better debt servicing capacity. Interest coverage ratios improved during the year, reflecting both higher operating cash flows and easing financing costs. Debt coverage indicators also strengthened, supporting the Company’s financial flexibility.

The Company’s equity base strengthened further, increasing to PKR 690.5 million as of FY25 (FY24: PKR 590.0 million), driven by retained earnings during the year. The expanded equity cushion provides additional balance sheet support and enhances the Company’s capacity to absorb potential shocks.