Khas Textile Mills (Pvt.) Limited (Khas Textile or the Company) was incorporated in 2001 as a private limited company under the Companies Ordinance of Pakistan.

Khas Textile was established with the primary objective of manufacturing yarn. In 2006, the Company underwent a significant transformation, expanding its product range to include cotton ring yarn and open-end yarn. This strategic shift marked the beginning of a more defined manufacturing orientation for the Company within the spinning sub-sector of Pakistan's textile industry. Over subsequent years, the Company progressively increased its production capacity, adding spindles and rotors to its installed base. The Company's growth has been organic in nature, with no acquisitions or mergers on record. Throughout its operational history, the shareholding has remained within the founding family, providing continuity of ownership and strategic direction.

Its manufacturing facility, purpose-built and located in Nooriabad, Karachi, operates 19,200 spindles and 864 rotors. In addition to its spinning infrastructure, the Company maintains a captive power generation capacity including a solar plant of 2MW, which exceeds its operational requirement of 3.5 MW. The Company's revenue is derived predominantly from yarn sales, with ~98% contributed by the domestic market and the remainder from direct exports. The primary raw material consumed in production is cotton, which is sourced from both domestic and imported origins. Its customers are principally domestic yarn buyers, and its distribution footprint is confined to the local market, with a residual export component that exposes it marginally to foreign currency dynamics. The Company has additional land available at its Nooriabad site, providing optionality for future capacity expansion.

The Company is wholly owned by the sponsoring family, with Mr. Khurram Ashfaq and Mr. Noman Ashfaq each holding approximately 33% of the Company’s shares. The remaining shareholding of approximately 34% is equally held by Mrs. Saira Noman and Mr. Muhammad Muneeb Ashfaq, with each holding around 17%. Mr. Ashfaq Ahmed serves as the Chairman of the Board, while Mr. Khurram Ashfaq is the Managing Director. The Company is supported by an experienced management team, with the sponsoring family maintaining active involvement in the business.

The shareholding has remained exclusively within the sponsoring family since the Company's incorporation in 2001, reflecting a stable and uncontested ownership structure. The clear distribution of stakes among family members provides an additional layer of structural coherence. However, no formal succession plan has been documented.

The sponsoring family brings broad and multi-sectoral professional experience to the stewardship of the Company. Their business interests span the spinning, aluminum, poultry, socks and knitwear, and building hardware import sectors, reflecting a capacity to manage diverse commercial operations. This diversified entrepreneurial background supports the family's understanding of capital-intensive industries and their ability to navigate cyclical business conditions. The performance of their affiliated ventures across sectors adds to their credibility as business operators.

The Khas Group of Industries comprises five companies operating across different sectors, providing a degree of conglomerate diversification to the group's financial base. In addition to domestic operations, the sponsors have a joint venture with KAI Aluminum, which is positioned as the largest aluminum manufacturer in Bangladesh, indicating cross-border business exposure and international commercial engagement. The sponsors maintain an adequate net worth position and have demonstrated a willingness to support the Company's operations when required.

The Company has a five-member Board of Directors. Three of the members serve as Executive Directors, and the remaining two are Non-Executive Directors. No independent directors have been reported. All directors have maintained their affiliation with the Company since its inception, reflecting continuity at the governance level. No formal board committees, including an Audit Committee or a Human Resource and Remuneration Committee, have been constituted.

Mr. Ashfaq Ahmed serves as the Chairman of the Board and brings over 45 years of professional experience across diverse industries, including spinning. His extensive tenure in the sector provides the Board with foundational industry knowledge at the leadership level. Mr. Khurram Ashfaq, the Company's Managing Director, has over two decades of experience in overseeing the operations and strategic direction of the Company. The remaining Board members, including Mr. Noman Ashfaq, Mrs. Saira Noman, and Mr. Muhammad Muneeb Ashfaq, are part of the sponsoring family and have been directly or indirectly associated with the Company since its establishment. The Board's composition reflects a family-driven governance model, with skill diversity primarily derived from the family's broader business interests rather than from independent external expertise.

The active engagement of the Board members in the day-to-day running of the business supports a degree of operational oversight and strategic alignment between ownership and management objectives. However, the absence of formal board committees limits the institutionalisation of governance functions such as audit oversight, risk review, and executive remuneration governance. The roles of Chairman and Managing Director are held by separate individuals, which provides a nominal separation of governance and executive authority. The absence of an Audit Committee means that related-party transactions, which are material to the Company's financial profile, are not subject to a structured independent oversight mechanism.

A. D. Akhawala & Co., the Company's external auditors, hold a valid QCR rating (though not on the SBP panel) and have expressed an unmodified opinion on the FY25 financial statements, reflecting adequate financial transparency.

The Company's organisational structure is built around five core departments, namely Production, Power House, Finance, Factory Administration, and Human Resources. Each department is headed by a designated department head who reports to the Chief Financial Officer. Group management exercises overarching oversight of operations, providing clear reporting lines across the organisational hierarchy. The decision-making model is moderately centralised, with the Managing Director serving as the primary authority for strategic and operational matters. Delegation of authority flows from the Managing Director through the CFO to departmental heads, with a defined segregation of duties maintained across functions.

Mr. Khurram Ashfaq, Managing Director, holds primary responsibility for all matters pertaining to the Company's operations and strategic direction. He brings more than two decades of experience in the spinning sector and in the management of the Company specifically. He is supported by a team of experienced professionals across production, finance, and administrative functions.

Management has demonstrated a degree of responsiveness to operational challenges. The Company's strategy of securing shorter-term purchase orders reflects a pragmatic approach to managing demand uncertainty and reducing inventory risk. Management members meet regularly to address operational issues in the absence of formal management committees, and this informal coordination mechanism has contributed to the maintenance of operational continuity.

The Company operates on a customised SAP Business One version 8.82 system, implemented by Abacus Consulting. The platform covers key functional modules including accounts payable, accounts receivable, and inventory management. Management reports generated through the system are reviewed regularly by senior management, supporting timely and informed decision-making across operational and financial dimensions. The use of an ERP system of this nature for a private spinning mill reflects a reasonable level of information infrastructure.

The Company has an internal audit department in place comprising of, which provides a baseline of internal control oversight. The Company maintains updated technological infrastructure across its manufacturing and support functions to promote quality and cost efficiency.

Pakistan’s textile exports increased to USD 17.93 billion during FY26, up from USD 17.88 billion in the corresponding period last year, reflecting a 0.26% YoY growth, according to the Pakistan Bureau of Statistics (PBS). The increase was primarily supported by stronger exports from the value-added segment, particularly readymade garments, and cotton yarn. However, exports of cotton cloth, synthetic textiles, tents & canvas, and non-cotton yarn recorded a decline. Despite this positive performance, the sector continues to face challenges arising from heightened geopolitical tensions, which have contributed to increased volatility in global energy and freight markets. According to APTMA, rising costs related to energy, freight, insurance, and financing are likely to exert pressure on exporters' profitability. The association emphasizes that maintaining competitive energy tariffs and ensuring policy consistency will remain critical for sustaining the international competitiveness of Pakistan’s textile industry.

With an installed capacity of 19,200 spindles and 864 rotors, the Company represents a relatively small participant in Pakistan’s spinning industry. Compared to larger integrated textile manufacturers, the Company operates on a more modest scale and maintains a focused presence in the spinning segment. Its competitive position is supported by its operational expertise and affiliation with the Khas Group, while the larger peers benefit from diversified operations and greater economies of scale. Since the previous review, no material change has been observed in the Company’s competitive positioning, and it continues to operate as a focused spinning mill within the domestic textile industry.

During 9MFY26, the Company recorded revenue of PKR 3.0bln, compared to PKR 3.9bln reported in FY25. Revenue remained predominantly driven by local sales. The overall sales trajectory remains dependent on domestic demand and prevailing market conditions.

The Company's profitability profile improved during 9MFY26, with gross margin increasing to 16.0% compared to 12.7% in FY25. Similarly, operating margin improved to 11.1% from 8.0%, reflecting better operational profitability. At the bottom line, net profit margin strengthened to 1.3% compared to 0.4% in FY25. The improvement in profitability was further supported by lower finance costs, which declined to PKR 266mln during 9MFY26 from PKR 411mln in FY25, providing some relief to overall earnings. Sustaining the improved margins amid prevailing cost pressures and market conditions remains important going forward.

The Company's strategy remains focused on optimizing capacity utilization while mitigating operational risks through the procurement of shorter-term purchase orders. The Company also aims to expand its export presence, particularly in China, by leveraging the Free Trade Agreement to enhance market access. However, limitations in solar capacity may constrain the Company's ability to fully optimize its energy mix. Going forward, efficient utilization of the expanded capacity, alongside increased exports and prudent management of energy constraints, will remain critical to sustaining the Company's long-term growth and financial performance.

The Company's working capital cycle lengthened to 217 days during 9MFY26, compared to 182 days in FY25, indicating increased funds tied up in the operating cycle. Inventory days increased to 80 days from 68 days, while trade receivable days also rose to 150 days from 130 days, reflecting higher inventory holding and slower realization of receivables. Meanwhile, trade payable days declined to 13 days from 16 days, indicating reduced reliance on supplier credit. The extended working capital cycle places additional pressure on liquidity and highlights the importance of improving inventory management and receivable collections going forward.

The Company's debt servicing capacity remained adequate during 9MFY26, with interest coverage maintained at 1.6x, unchanged from FY25. FCFO declined to PKR 385mln during 9MFY26 from PKR 600mln in FY25, reflecting lower internally generated cash flows. However, the debt service coverage ratio improved to 8.0x from 5.8x, supported by lower financing costs. Finance cost declined to PKR 266mln during 9MFY26 from PKR 411mln in FY25. The Company's borrowings stood at PKR 2.65bln, comprising PKR 2.35bln in short-term and PKR 307mln in long-term borrowings. Going forward, sustained cash flow generation and effective management of short-term borrowings will remain important to maintain adequate debt servicing capacity.

The Company's capitalization profile remained broadly stable during 9MFY26. Total borrowings increased marginally to PKR 2.72bln from PKR 2.65bln in FY25, while shareholders' equity increased to PKR 2.70bln from PKR 2.66bln. Consequently, the debt-to-equity position remained broadly balanced at around 1.0x. The Company's capitalization remains moderately leveraged, with borrowings primarily supporting working capital requirements. Going forward, maintaining a prudent capital structure and limiting reliance on incremental debt will remain important, particularly given the elongated working capital cycle.