H. Sadar Ali Akhtar Ali Pvt. Ltd (hereinafter referred to as ‘HSA’ or ‘the Company’) was incorporated in Pakistan on 11th August 1985, under the repealed Companies Ordinance 1984 (Now Companies Act, 2017). The Company’s registered office is located at 14- G.T Road, Hide Market, Lahore, the tannery is located at Mauza Halloki, Lahore. The Company has another manufacturing unit located at Niaz Nagar Kasur and a branch office located at Din Garh Kasur.

Founded in 1941 as a family-run leather business, HSA has steadily evolved over the decades into a cutting-edge leather processing and production facility. Through continuous innovation and dedication to quality, the Company has established itself as one of the leading manufacturers and exporters of finished leather in the country. Today, HSA is recognized for its expertise in leather craftsmanship, its commitment to sustainable production practices, and its strong global presence in the leather industry.

The principal activity of the Company is the manufacturing and sale of tanned and finished leather, leather products, and ready‑made garments. The Company produces a wide range of finished leather, including cow, sheep, goat, and buffalo hides, catering to both domestic and export markets. In 2017, HSA diversified its operations by establishing a Denim Division, which functions as an export‑oriented unit. The division is equipped with app ~452 machines, enabling large‑scale production of jeggings for ladies, gents, and children. All denim products manufactured under this division are exported, reflecting the Company’s growing focus on international markets and revenue diversification.

HSA is a family‑owned enterprise with shareholding distributed among members of the sponsoring family. The Chief Executive Officer, Mr. Mian Naeem Akhtar, holds a direct stake of ~3%. His sons, Mian Ahsan Ali, Mian Mohsin Ali, and Mian Hassan Ali, collectively own the majority of the Company, with respective stakes of ~26%, ~25%, and ~25%. In addition, Mr. Mian Saleem Akhtar, Director and brother of the CEO, holds around ~21% of the shares. This ownership structure reflects concentrated family control, ensuring alignment of interests and direct oversight of operations. While such concentration supports continuity and swift decision‑making, it also underscores the importance of formal governance mechanisms and succession planning to mitigate risks associated with family‑owned businesses.

HSA has established itself as a responsible participant in the leather industry by fostering an ethical corporate culture and embedding sustainability into its operations. The Company demonstrates a consistent commitment to innovation, enhancing the quality and diversity of its leather products in line with international standards. This focus on craftsmanship and compliance supports operational stability and strengthens long‑term market positioning. A key differentiator for HSA is its adherence to sustainable and responsible production practices. The Company’s initiatives in environmental stewardship have been formally recognized through the attainment of a Gold rating certification from the Leather Working Group (LWG), a globally respected authority on sustainable leather manufacturing. This certification underscores HSA’s leadership in ethical operations and positions the Company favorably among international buyers who prioritize sustainable sourcing. While sustainability initiatives enhance HSA’s competitive profile and export credibility, they also require ongoing investment, which may exert pressure on margins. Nevertheless, the Company’s demonstrated ability to balance profitability with responsible practices reinforces its resilience and supports its long‑term credit outlook.

With decades of industry expertise, the sponsoring family of HSA has cultivated a deep understanding of business dynamics, enabling the Company to adapt to evolving market conditions and sustain long‑term success. Historically recognized for its leather manufacturing, HSA has strategically broadened its scope, moving beyond traditional operations to establish value‑added segments that diversify revenue streams and reduce reliance on a single product line. At present, HSA stands as a prominent player in the production of premium leather jackets and denim garments aligning its portfolio with changing consumer preferences and global fashion trends. This diversification not only strengthens the Company’s market presence but also enhances resilience against cyclical demand in the leather sector. By integrating apparel manufacturing into its operations, HSA has positioned itself to serve a wider customer base, spanning on international markets. The Company’s ability to combine craftsmanship with innovation ensures that its products meet international quality benchmarks, reinforcing its reputation as a trusted exporter. Moreover, diversification into denim complements its core leather business, creating synergies in production and distribution. This strategic evolution underscores HSA’s transition from a traditional leather manufacturer to a multi‑segment textile and apparel enterprise, thereby reinforcing its standing as a leading name in Pakistan’s leather and textile industry.

HSA maintains a strong financial profile, underpinned by a substantial equity base of PKR 5.2bn as at IHFY26 (FY25: PKR 4.9bn). This reflects the Company’s resilience and long‑term stability, supported by consistent profitability and retained earnings. The Company’s robust financial foundation enables sustainable growth and underscores the sponsors’ demonstrated capacity to provide support whenever required. HSA’s well‑capitalized structure and access to bank financing position it to navigate liquidity pressures and market fluctuations. This financial strength allows HSA to seize new opportunities, particularly in export markets, while reinforcing its standing as a reliable and forward‑thinking industry leader. Continued focus on liquidity management, governance enhancements, and diversification of funding sources will be critical in sustaining this profile and supporting long‑term creditworthiness.

Board of Directors consists of five members, including Mr. Mian Naeem Akhtar, who serves as the CEO. Currently, the board is entirely composed of members from the sponsoring family, with no independent directors. While this structure fosters strong family leadership and continuity, it also highlights opportunities for further improvement by incorporating independent directors. Introducing independent board members could enhance governance, bring diverse perspectives, and strengthen strategic decision-making, further reinforcing the Company's commitment to transparency and sustainable growth in the industry.

HSA benefits from the extensive experience of its leadership, with Mr. Mian Naeem Akhtar, the CEO, bringing over five decades of expertise in the leather industry. Similarly, Mr. Mian Saleem Akhtar, serving as Director, has accumulated more than four decades of industry knowledge. Both leaders have been deeply involved in the Company since the time of their ancestors, ensuring continuity and a strong foundation built on tradition and craftsmanship. The board as a whole possesses vast experience in tannery operations, with a solid understanding of market dynamics and production techniques. Additionally, diversity in expertise within the board adds further value, allowing the Company to adapt to evolving industry trends and maintain its position as a leader in leather manufacturing.

The Board of Directors meets quarterly, adhering to regulatory requirements to ensure compliance and strategic oversight. These regular meetings foster full attendance, strengthening board engagement and effectiveness in decision-making. Additionally, detailed minutes are meticulously recorded, preserving transparency and accountability in governance. While existing practices reflect a commitment to corporate oversight, there remains room for further enhancement to optimize operational efficiency and governance standards.

M/s. Muniff Ziauddin & Co. are the external auditors of the Company. Auditors are QCR rated also appears on the SBP panel in A category. The auditors have expressed an unqualified audit opinion on the financial statements for the year ended June 30th, 2025.  The Company has taken a proactive approach to ensuring financial integrity by establishing an Internal Audit Department. This department plays a critical role in overseeing and evaluating financial controls, analysing cost budgets, and ensuring compliance with regulatory standards. By conducting independent assessments and providing recommendations, the Internal Audit Department strengthens accountability, enhances operational efficiency, and safeguards the organization's financial health.

A well-defined organizational structure is in place within the Company. At the top level, operations are divided into seven key functional departments: (i) Leather Wing, (ii) Accounts & Taxation, (iii) Human Resources (HR), (iv) MIS & IT, (v) Internal Audit, (vi) Administration, and (vii) HSA Apparel (Denim). Each department operates under clearly established roles and responsibilities, ensuring accountability, efficient workflow, and effective management across all functions.

Overall management control of the Company rests with the Board of Directors, which provides strategic oversight and ensures alignment with the Company’s long‑term objectives. The executive team comprises experienced professionals and family members, each entrusted with distinct responsibilities that collectively strengthen operational efficiency. Mr. Wajih‑ud‑Din, serving as Chief Financial Officer (CFO), brings over ~37 years of seasoned expertise in financial management, risk oversight, and compliance. His extensive background provides stability in financial planning and ensures prudent capital allocation. Mr. Ahsan Ali oversees finance and the denim division, integrating financial discipline with operational expansion in the Company’s export‑oriented apparel segment. Mr. Mohsin Ali manages the technical aspects of leather production, leveraging industry knowledge to maintain product quality and adherence to international standards. Mr. Hassan Ali leads the Company’s marketing initiatives, focusing on brand positioning, customer engagement, and expansion into new markets.This structured division of responsibilities enables HSA to balance technical expertise, financial prudence, and market development. While the governance framework remains concentrated within the sponsoring family, the presence of seasoned professionals in key roles enhances operational depth. Strengthening board independence and formalizing governance committees would further align the Company with best practices, supporting long‑term sustainability and creditworthiness.

Supported by a highly qualified team of professionals, HSA continues to strengthen its core capabilities while expanding its presence both domestically and internationally. The Company’s growth strategy is guided by a clear management framework that ensures operational efficiency, disciplined financial oversight, and alignment with long‑term objectives. Through the collective expertise of its leadership, HSA has evolved from a traditional leather manufacturer into a diversified enterprise producing premium leather jackets, gloves, denim apparel, and twill garments. This structured approach enables the Company to balance technical excellence, financial prudence, and market development, reinforcing its competitive position in global markets. The management’s focus on innovation, quality, and sustainability has established HSA as a trusted exporter capable of meeting evolving consumer preferences and international standards. Continued investment in professional talent, governance enhancements, and market diversification will be critical in sustaining this trajectory and supporting the Company’s long‑term credit profile.

To support operational efficiency and strengthen internal controls, HSA has implemented an enterprise resource planning (ERP) solution, Sherpa ERP (version 17.12). Sherpa is a cloud‑based business management platform designed for small and medium‑sized enterprises, enabling automation of manual processes and integration of critical business functions. Through this system, HSA consolidates customer, sales, inventory, and financial data into a single platform, ensuring real‑time visibility and streamlined workflows. The adoption of Sherpa ERP reflects management’s commitment to modernizing operations, enhancing transparency, and improving decision‑making capabilities. By digitizing core processes, the Company reduces operational inefficiencies, strengthens reporting accuracy, and supports compliance with regulatory requirements. This investment in technology not only enhances internal governance but also positions HSA to scale operations effectively, manage complex supply chains, and respond swiftly to market dynamics. Continued upgrades and integration of advanced modules will further reinforce the Company’s ability to sustain growth and maintain competitiveness in both domestic and international markets.

HSA embraces a balanced and environmentally conscious growth strategy, embedding sustainable development principles across all aspects of its operations. The Company is dedicated to minimizing environmental impact through responsible practices, innovative solutions, and continuous investment in eco‑friendly technologies. As part of this commitment, HSA has installed an imported, state‑of‑the‑art Waste Water Treatment Plant, ensuring efficient water management, recycling, and pollution control. This initiative not only aligns with global sustainability standards but also demonstrates proactive compliance with environmental regulations, reinforcing the Company’s credibility among international buyers. In addition, HSA fully complies with ISO 45001:2018, an internationally recognized standard for occupational health and safety. This certification reflects the Company’s dual focus on environmental stewardship and workplace safety, ensuring that sustainability is integrated with employee well‑being. Through these initiatives, HSA continues to lead by example, fostering an eco‑conscious business model that strengthens its competitive edge in the global leather and apparel industries. By aligning with international sustainability frameworks, the Company enhances its long‑term resilience, supports export competitiveness, and positions itself as a trusted partner for buyers who prioritize ethical and environmentally responsible sourcing.

Pakistan’s leather industry is recognized for its craftsmanship and adherence to quality standards, making its products highly sought after both locally and internationally. Despite economic challenges, the sector has demonstrated resilience, supported by investments in advanced manufacturing techniques, sustainable practices, and modern equipment. Classified as part of Large-Scale Manufacturing (LSM), the industry contributed to overall LSM growth of ~5.8% during IHFY26. Leather exports rose ~7.6% YoY to USD ~46.6mn in FY25 (SPLY: USD ~43.3mn), with Vietnam accounting for ~23.9% of total exports. Key export categories include leather gloves (~37%), apparel (~28%), and tanned leather (~16%). During 8MFY26, apparel, accessories, and footwear registered growth, though overall performance faced headwinds from global slowdowns, supply chain disruptions, and rising preference for synthetic alternatives. Tanned leather has emerged as the strongest growth driver, rebounding from a ~9% decline in FY24 to ~7.6% growth in FY25, and accelerating to ~8.7% in 8MFY26. Exports to Vietnam rose ~21.6% YoY, representing ~31.5% of this segment. However, reliance on a single dominant market poses concentration risks. Leather apparel remains heavily dependent on Western markets, with the U.S., Germany, and U.K. collectively accounting for ~47.7% of exports. The U.S. share slipped to ~27% in 8MFY26 (SPLY: ~28.2%), highlighting the need for diversification. Sustained competitiveness will depend on innovation, cost efficiency, and expansion into value-added products such as footwear.

H. Sadar Ali Akhtar Ali (Pvt.) Limited (HSA) has firmly established itself as one of the largest leather exporters in Pakistan, consistently maintaining market leadership through sustained revenue growth and operational expansion. The Company’s ability to deliver growth at an accelerating pace reflects its strong business fundamentals, adaptability to global demand cycles, and commitment to innovation. Over the years, HSA has strategically broadened its horizons, venturing into new business areas beyond traditional leather manufacturing. This diversification has included premium leather jackets, denim apparel including jeggings, enabling the Company to capture evolving fashion trends and expand its customer base across multiple geographies. By integrating value‑added segments into its portfolio, HSA has reduced concentration risk and reinforced its resilience against cyclical fluctuations in the leather industry. The Company’s focus on quality excellence, sustainability, and operational efficiency has further strengthened its reputation as a trusted name in both domestic and international markets. Recognition through certifications such as the Leather Working Group (LWG) Gold rating and compliance with global standards underscores HSA’s credibility among international buyers who prioritize ethical and sustainable sourcing. Through this combination of market leadership, diversification, and adherence to global best practices, HSA continues to solidify its position as a leading force in Pakistan’s leather and textile industry, with a strong foundation for long‑term growth and competitiveness.

During IHFY26, HSA recorded revenues of PKR 4,960 million, compared to PKR 9,428 million in FY25. This sustained topline trajectory reflects the Company’s expanding market presence and reinforces its strong revenue‑generating capacity. The growth trend underscores HSA’s ability to adapt to evolving demand cycles while maintaining consistency in its export‑oriented operations. A significant portion of the Company’s revenues—around 85% of total sales—is derived from exports, highlighting HSA’s entrenched global footprint in the leather and apparel industries. The remaining 15% of sales are generated from the domestic market, which largely represents indirect exports through local buyers supplying international markets. This dual channel of revenue generation strengthens HSA’s contribution to Pakistan’s export sector while diversifying its customer base. The Company’s reliance on international markets positions it favorably among global buyers, particularly given its certifications and sustainability credentials. At the same time, the presence in the local market provides a supplementary buffer, ensuring continuity of operations and reinforcing HSA’s role as a leading force in both domestic and international trade.

During IHFY26, HSA reported gross margins of ~16%, broadly in line with ~17% in FY25, reflecting stability in cost management despite fluctuations in raw material and energy prices. The Company’s ability to sustain margins at this level highlights operational efficiency and resilience in its core manufacturing processes. The operating profit margin showed a modest improvement, rising to ~6% in IHFY26 from ~5.3% in FY25, supported by tighter control over administrative and distribution expenses. This improvement indicates progress in optimizing operating costs and enhancing efficiency, even as topline growth continues. At the bottom line, the net profit margin stood at ~3.0% in IHFY26, nearly consistent with ~3.2% in FY25. The stability of net margins underscores the Company’s disciplined financial management, balancing profitability with ongoing investments in diversification and sustainability initiatives. Overall, HSA’s margin profile reflects a steady operating performance, with incremental improvements in operating efficiency offsetting pressures on gross margins. Sustained focus on cost optimization, value‑added product segments, and efficiency gains will be critical in further strengthening profitability and supporting long‑term creditworthiness.

HSA is committed to establishing a strong and sustainable presence in both local and international markets by continuously investing in cutting‑edge technology and advanced machinery. These strategic enhancements are designed to optimize production lines, improve efficiency, and elevate product quality, thereby reinforcing the Company’s competitive edge in the global leather and apparel industries. As part of its long‑term sustainability vision, HSA has planned the installation of a solar power project with a capacity of 1,200 KWT, aimed at generating sufficient renewable energy to meet the entire manufacturing facility’s requirements. This eco‑friendly investment not only reduces reliance on conventional energy sources but also aligns with the Company’s goal of lowering its carbon footprint and ensuring operational sustainability. In addition to technological upgrades, management conducts periodic reviews of business performance, utilizing detailed projections and forecasts to make informed strategic decisions. This proactive approach enables HSA to anticipate market challenges, capitalize on emerging opportunities, and maintain alignment with its long‑term growth objectives. Through the integration of advanced technology, renewable energy initiatives, and disciplined management practices, HSA continues to strengthen its operational resilience, enhance sustainability, and solidify its position as a forward‑thinking leader in Pakistan’s leather and textile industry.

During IHFY26, HSA reported gross working capital days of 183, compared to 171 days in FY25. This increase reflects extended cash conversion cycles, though the Company continues to demonstrate effective management of its operating assets. Average inventory days have remained relatively consistent over the last three years, fluctuating between 134 to 142 days, indicating stable inventory turnover and disciplined stock management practices. Meanwhile, average receivable days reached 41 days in IHFY26, a marginal increase from 32 days in FY25, highlighting continued efficiency in receivables collection despite growth in export volumes. The net working capital cycle increased to 92 days in IHFY26, up from 67 days in FY25, reflecting higher capital absorption in operations. While this elongation warrants close monitoring, it remains manageable given the Company’s structured approach to liquidity planning and access to bank financing. Overall, HSA maintains a disciplined working capital framework, balancing inventory management with efficient receivables collection. This structured approach supports financial stability, optimizes liquidity, and ensures the Company’s ability to meet short‑term obligations while sustaining growth in both domestic and international markets.

During IHFY26, HSA generated free cash flows from operations (FCFO) of PKR 215 million, compared to PKR 576 million in FY25. The decline reflects fluctuations in operational cash generation, primarily driven by working capital movements and variability in trade receivables. Despite this moderation, the Company continues to demonstrate its ability to generate positive operating cash flows, underscoring resilience in its core business operations. The interest coverage ratio stood at ~3.2x in IHFY26, down from ~8.4x in FY25, indicating reduced headroom in servicing finance costs. However, the core‑debt coverage ratio improved significantly to ~0.8x in IHFY26 (FY25: 0.5x), reflecting enhanced capacity to meet core debt obligations. This improvement highlights management’s focus on prudent debt management and strengthening repayment ability. Collectively, these financial metrics emphasize HSA’s commitment to maintaining liquidity discipline and debt servicing efficiency. While the decline in operating cash flows warrants close monitoring, the improvement in debt coverage ratios demonstrates progress in financial risk management. Sustained focus on cash flow optimization, coupled with diversification of funding sources, will be critical in ensuring long‑term financial sustainability and supporting the Company’s credit profile.

In IHFY26, HSA maintained a moderately leveraged capital structure, with a leveraging ratio of ~33%, compared to ~31% in FY25. Over the past three years, the Company’s leverage levels have remained relatively stable, reflecting a balanced approach to debt utilization and prudent financial management. A significant portion of the Company’s debt—around ~90% in IHFY26 (FY25: 89%)—consists of short‑term borrowings, underscoring HSA’s reliance on flexible financing to meet operational requirements. This structure provides agility in managing working capital cycles, though it also highlights the importance of maintaining strong liquidity buffers to mitigate refinancing risks. In addition, HSA has secured both long‑term and short‑term borrowings at concessionary rates under the State Bank of Pakistan (SBP) schemes, which has optimized financial costs and supported liquidity management. Access to subsidized financing not only reduces the Company’s interest burden but also enhances its ability to invest in expansion and sustainability initiatives without exerting undue pressure on cash flows. Overall, HSA’s capital structure reflects a disciplined balance between equity strength and debt reliance. Continued focus on diversifying funding sources, managing short‑term debt exposure, and leveraging concessionary financing will be critical in sustaining financial flexibility and reinforcing the Company’s long‑term credit profile.