The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Assigns Initial Entity Ratings to Khaadi Pakistan (SMC-Pvt) Limited

Rating Type Entity
(14-Dec-20 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Khaadi is a distinct player in the retail fashion industry. With over two decades of history, reflecting growth and expansion, Khaadi has built strong brand equity. It has become synonymous with innovation and quality while ensuring affordability for its target customer base. The basket of the products offered and the topline size and growth supplement this assertion. The business model of Khaadi, as envisioned by its founder and CEO, has been the self-propelling force for the expansion of the entity. The retail network has reached half a million square foot physical presence. The brand has outreached outside Pakistan as well. Khaadi designs its outlets in a way to give more than shopping experience to walk-in customers. The management is focusing on further expansion. Potential induction of an equity partner will be of further help. The entity has a strong management structure in place, with professionals leading their respective roles. COVID-19 has impacted the retail sector severely; though revival is underway, it will take some time for a full recovery to take place. The reported number for the recent period reflects dilution. While debt metrics accordingly depict a weak position, they are expected to improve post equity injection and recovery in the business.
The ratings are dependent on the recovery in the business performance and relative position of the entity. The financial profile is also expected to improve as anticipated. Governance of the Company is expected to take positive support from the initiatives undertaken by the sponsor shareholder.

About the Entity
Khaadi is a multinational Pakistani retail fashion brand. It started operations in 1998 by offering kurtas and loose fabric made from the hand-woven fabric of both eastern and western touch. Khaadi has now an exceptional retail network with over 61 stores in Pakistan, 14 in UK, UAE, Qatar, and Bahrain. Apart from the physical stores, Khaadi’s online store is also generating revenues. The Company has a good market share in the retail segment within the country. The Company has laid its foundation on the back of brand strength, retail market, fashion design, marketing, supply chain, strategy, and finance.
Mr. Shamoon Sultan is the owner and founder of Khaadi. He is the man at the last mile and the driving force behind the success and growth of the Company. Khaadi has grown under his leadership. A team of professionals assist him.

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.