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The Pakistan Credit Rating Agency Limited
Press Release

Date
20-Mar-23

Analyst
Iram Shahzadi
iram.shahzadi@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to US Denim Mills (Pvt.) Limited

Rating Type Entity
Current
(20-Mar-23 )
Action Initial
Long Term A
Short Term A1
Outlook Stable
Rating Watch -

US Denim Mills (Private) Limited (US Denim, The Company) is a prominent textile venture of US Group. The Group has a holding Company, named AJ Holding Limited, which also exists for managing investments in subsidiaries and associated companies. The sponsors are in charge of the individual enterprises, oversee the professional management, and are well-equipped and experienced. Strategic direction is meticulously worked out and rigorously followed once decided and finalized. The Company is principally engaged in the manufacturing and sale of denim fabric. 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 Company with name Us Fashion Turkey Tekstil Ticaret Anonim Sirketi. US Fashion Turkey Tekstil Ticaret Anonim Şirketi was established on 31 January 2017 in Istanbul, Turkey. The Company’s income comprises domestic and export sales. The assigned ratings derive comfort from US Denim’s association with the US Group. The company reported a 33% increase in topline with marginal improvement in gross margins during FY22 on the back of higher volumetric sales and favorable prices. The major portion of the revenue base is derived from indirect exports (61%). The Company has also direct exports (38%) to Asia (Bangladesh, Srilanka), Africa (Morocco, Madagascar) & Europe (Turkey, Italy). US Denim continues to maintain a favorable capital structure and strong coverages signifying a robust financial profile. Going forward, the Company is planning CAPEX for vertical integration within the Group, which will be entirely funded from equity.
During 7MFY23, the textile exports of the country were valued at $10.08bln compared to $10.93bln, reflecting an 8% decline YoY – the declining trend has been recorded in the last few months. The decline in exports is driven by attrition in the demand pattern of export avenues.
The ratings are dependent on the Company’s ability to maintain a strong business profile amidst current circumstances. Preserving low-leveraged capital structure and sound coverages remain imperative.

About the Entity
US Denim (Private) Limited (US Denim, The Company) was incorporated on January 18, 2005 as a private limited company. The company has a weaving unit with 229 air jet looms and 20 power looms that can produce 100,732 fabric meters per day. AJ Holding (Private) Limited holds 100% shareholding of US Denim. A Group holding company, AJ Holding Limited, also exists for managing investments in subsidiaries and associated companies and this bodes well for stability. 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, 2022.
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-four 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.