H.A.R Fibres (Private) Limited (‘H.A.R Fibres’ or ‘the Company’) was incorporated in Jun-18 under the Companies Act, 2017.

H.A.R Fibres is a venture of the Shahid Family that holds interests in yarn trading in Faisalabad. The Company is a part of H.A.R Group, with H.A.R Textile Mills (Pvt.) Limited is the other group company, which has been operational since 1958.

H.A.R Fibres specializes in yarn manufacturing and distribution, headquartered near Faisalabad's Clock Tower. Its manufacturing plant is located in Mohalla Mughalpura, Naya Lahore, and houses approximately 20,000 spindles and 1,320 rotors ensuring operational efficiency and accessibility to key resources and markets.

Mr. Shahid Mehmood Sheikh possesses ~40% stake in the Company. The remaining ownership is distributed among his sons: Mr. Haroon Shahid (~20%), Mr. Faizan Shahid (~20%), and Mr. Adan Shahid (~20%).

H.A.R inherits the technical and business expertise from the first generation to the second generation of the Shahid family, combining the guidance and knowledge of the founders with the new generation. However, a formal succession plan requires to be documented.

The sponsoring family is interested in textiles and investing in the real estate sector. The sponsors have vast experience and knowledge of various aspects of the textile value chain and have witnessed many businesses over a span of more than four decades.

The Sponsors possess significant financial strength to support the Company, if required, going forward.

The four-member board of directors (BoD) is dominated by the Sponsoring family and comprises an Executive Director and three Non-Executive Directors. The BoD's decision-making process can be strengthened by the inclusion of an Independent director.

Mr. Shahid Mehmood Sheikh, the BoDs Chairman and Chief Executive Officer (CEO), has been in the yarn trading business for the last 46 years and enjoys a good reputation in the business community. Mr. Haroon Shahid, Non-Executive Director, has an overall experience of more than two decades in yarn manufacturing and trading and has been associated with the Company for 5 years. All other Board members are qualified in different disciplines and have ample experience in textile and other industries.

The absence of a structured system for recording BoD minutes highlights a need for improvement in the overall governance framework. Moreover, there is a lack of BoD committees to facilitate the decision-making process.

Zahid Jamil & Co., the Company’s external auditors, is a QCR-rated audit firm and holds a Category ‘B’ listing with the State Bank of Pakistan. They issued a qualified opinion on the Company’s financial statements for FY25, due to the non-recognition of employees’ retirement benefits in accordance with applicable Pakistani laws.

H.A.R Fibres organizational framework comprises three primary departments: i) Finance, Admin & Marketing, ii) Purchase, and iii) Production. Each department is headed by a respective head, who reports to the Executive Directors, who reports to the CEO. The CEO makes the pertinent decisions and is considered the man at the last mile.

Mr. Shahid Mehmood Sheikh holds the position of CEO. He has been in the yarn trading business for the last 46 years and enjoys a good reputation in the business community. Mr. Ejaz Ali, the CFO, has more than three decades of experience and has been associated with the Company for five years. They are assisted by a team of professionals.

The Company has no management committees. The Sponsor's close involvement in day-to-day business affairs bodes well for the effectiveness of the Company.

H.A.R Fibres has built an in-house oracle to cater to the business needs. The senior management monitors the business performance through certain Key MIS reports.

Production is completely order driven, and the QC department conducts a rigorous quality check on the end product. The Company has obtained ISO 9001 certification.

Textile exports reached USD 17.9bln in FY25, a modest rise from USD 16.7bln the previous year, reflecting a 7.2% year-over-year growth. The largest contribution came from the composite and garments segment, at USD 14bln, which included the weaving segment at USD 1.8bln and the spinning segment at USD 0.7bln. The production of cotton cloth in FY25 declined by approximately 0.7% year over year, reaching around 877.1mln square meters. During FY25, about 25.3% of the cotton cloth produced was exported (compared to roughly 27.2% in FY24), with the rest used for the domestic market. The country's fabric exports fell by approximately 4.4% in FY25 (FY24: up about 5.8% YoY), with approximately 23.4% of Pakistan's cotton cloth exports going to Bangladesh (compared to about 19.9% in FY24), followed by the USA with about 8.1% of cotton cloth exports (compared to approximately 7.8% in FY24). In FY25, the transition from the final tax regime to the normal tax regime is expected to affect the profitability of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The recent removal of GST exemption (Finance Bill, 2025) on textile inputs for exporters registered under the Export Facilitation Scheme (EFS) will offer tax protection and create a level playing field for domestic cotton and yarn producers. Currently, internat ional cotton prices are higher than the price of locally produced cotton. The gap has widened to approximately 9.8 cents per pound (as of July 18, 2025), resulting in an average increase of about USD 36.8 per bale of imported cotton. A greater reliance on imported cotton could Lead to higher raw material costs, ultimately impacting yarn prices and profit margins for the sector. Conversely, energy and finance costs are expected to stay within a range, given the projected reduction in interest rates and the absence of any major energy tariff increases. Considering the current climate change, flooding in major cotton regions, and shifting crop patterns, the target of approximately 10.2mln bales for FY26 appears challenging.

With its operational spindle count of 20,000, H.A.R Fibers is categorized as a relatively small player in Pakistan's spinning sector.

H.A.R Fibres reported a revenue of PKR 832mln during FY25, reflecting a decline of 10.5% compared to PKR 930mln in FY24. The Company lacks a dedicated brand-specific customer base and distributes its entire production in Faisalabad through sales brokers. H.A.R Fibres is exposed to significant customer concentration risk as it relies solely on local yarn sales. During 6MFY26, the Revenue was Reported at PKR 436mln. However, going forward, revenue is expected to improve, supported by the anticipated recovery in the country’s economic conditions.

During FY25, the cost of goods sold decreased in line with the decline in revenue and was reported at PKR 479mln (FY24: PKR 832mln), resulting in a gross profit of PKR 83mln (FY24: PKR 92mln). The gross margin remained stable at 10.0%. Net profit improved significantly to PKR 36mln (FY24: PKR 3mln), translating into a net profit margin of 4.4% (FY24: 0.3%). During 6MFY26, the Company reported further improvement in profitability, with gross and net profit margins recorded at 12.8% and 6.3%, respectively. Going forward, margins are expected to improve, supported by the declining policy rate and the Company’s gradual transition towards solar energy, which is likely to reduce energy costs.

Going forward, the Company does not have any plans for a BMR. While past initiatives have focused on efficiency improvements, there are currently no capital expenditure projects aimed at expanding production capacity. However, H.A.R Fibres intends to install additional solar panels to further enhance cost efficiency.

As of FY25, increased demand led to an improvement in inventory management, with inventory turnover days reducing to 511 days (FY24: 610 days). Trade receivable days slightly increased to 32 days (FY24: 31 days), reflecting largely stable collection efficiency. Meanwhile, trade payable days increased to 227 days (FY24: 199 days), indicating a moderate ability of the Company to negotiate favorable credit terms from suppliers. The combined effect of lower inventory days, relatively stable receivable days, and extended payable days resulted in an improvement in the net working capital cycle, which reduced to 315 days (FY24: 442 days). During 6MFY26, the Company’s net working capital cycle further improved to 222 days. The Company’s borrowing cushion remains moderate.

As of FY25, the Company’s Free Cash Flow from Operations (FCFO) was reported at PKR 77mln (FY24: PKR 90mln). Finance cost decline to PKR 7mln (FY24: PKR 13mln). This reduction in finance cost resulted in an improvement in FCFO-to-finance cost coverage, which stood at 26.1x (FY24: 23.1x). Going forward, coverage indicators are expected to strengthen further, supported by the anticipated decline in finance costs.

As of FY24, the Company reported a decline in total borrowings by 2.4%, reported at PKR 162mln (FY24: PKR 166mln), primarily due to a decrease in long-term borrowings reported at PKR 20mln (FY24: PKR 40mln). Shareholders’ equity increased by 7.1%, reported at PKR 627mln (FY24: PKR 585mln), resulting in an improvement in the Company’s leverage reported at 25.2% (FY24: 27.4%).