The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Saif Textile Mills Limited

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

Saif Textile Mills limited (Saif Textile), a prominent textile venture of Saif Group, is involved in manufacturing and marketing of several varieties of cotton yarn including, melange yarn, dyed yarn, man-made yarn and raw white yarn. The top line of the Company has recorded a healthy growth. During 9MFY21, underpinned by higher volumetric sales and favorable yarn prices. Hence, the Company recorded good net profitability after losses in FY20. Improvement in profitability reflects on the margins of the Company. The company’s financial risk profile remains adequate. Improvement in coverage witnessed after healthy profitability, however leveraging remains towards margin end. Going forward, with better efficiency and specialized product profile, the management expects Saif Textile’s margins to improve further. COVID-19 is an ongoing challenge. The proactive measures are taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge. The assigned ratings incorporate an experienced management team, the strong financial muscle of the Sponsors and their willingness to support the entity as demonstrated historically.
The ratings are dependent on managing financial obligations effectively while improving business margins. Any further accumulation of debt and/or shift from current business strategy, impacting the risk profile of the entity, may negatively affect the ratings. Going forward, Saif group's support to the entity and prudent debt management would remain critical.

About the Entity
Saif Textile Mills Limited, incorporated in 1989, is engaged in manufacturing and marketing of yarn. The Company operates with three spinning units installed at Gadoon Industrial Estate KPK, having total capacity of 106,800 spindles. Saif Textile is also involved in dyeing of yarn, though at small scale. Saif Textile is majorly owned by Saif holdings (50%) followed by NIT (7%), State life (4%) and significant free float (39%). Saif Holdings – holding company of Saif group, has interests in Textile, Feeds, Energy, Health, Technology and Real Estate sectors. Saif Textile's board comprises seven members, including the Chairman - Mr. Osman Saifullah.

The board include four non-executive directors, one executive director, while two directors are independent. Mr. Osman Saifullah – Chairman – holds a post graduate degree in engineering from University of Oxford and post graduate degree in business administration from University of Stanford. The board members have vast knowledge and expertise of textile industry, though diversity in experiences exists as well, ensuring a requisite skill mix for strategic planning.

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.