The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Assigns Initial Entity Ratings to A.J. Textile Mills Limited

Rating Type Entity
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

AJ Textile, a private limited company is a group concern of Aziz group – one of the oldest conglomerates, with business ventures in Textile (Yarn Production); FMCG (Match Manufacturing), Laminated Boards, MDF and Particles Chip Board Production. The Group has recently entered into Real Estate Sector with their first project (AJ Tower) under development in Islamabad. Over the years, since its commencement, the Company has expanded in to three units with installed capacity of 90,845 spindles, producing blended, cotton and plied yarns in Ring and Vortex spinning (equivalent to 15,000 spindles). The Company has installed power generation capacity of 9 MW power plant and 1 MW Solar plant on its profile. The ratings incorporate the Company’s moderate yet improving business profile where the revenue is emanating from single segment. Further improvement in control environment remains vital. The management meetings are held regularly with follow-up points to resolve or pro-actively address operational issues, if any, eventually ensuring smooth flow of operations. During FY21, revenues and margins witnessed significant growth trend along with sizably improved profitability. The Company has moderately leveraged capital structure, maintained over the years. The strengthening of equity base has enhanced the risk absorption capacity of the company. Coverages and cash cycle has improved during the period. Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20 due to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase. The probability of little attrition in demand remains on the horizon attributable to the outbreak of COVID-19 variants.
The ratings are dependent on improving business profile under the current economic conditions; and a strong financial profile with healthy coverage. Improvement in governance framework and inclusion of independent oversight remains essential. The ability to generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

About the Entity
AJ Textile’s board consists of four members, all belonging to the Aziz family. Mr. Mohsin – the Chairman, possess 40 years of industrial experience. He is also a current member of the Senate of Pakistan. Mr. Afan Aziz; son of Mr. Mohsin Aziz, and has been associated with the company since 2002. He possesses over 20 years of industrial experience. The Company's current operational capacity comprises 90,845 Spindles. The total energy requirement of the Company is met by in-house power generation capability of up to 10MW, achieved through ~5MW gas-based generators, along with HFO & solar based power plants.

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.