PACRA Maintains Entity Ratings of Crown Textile

The rating of Crown Textile (“Crown” or “the Company”) emanates from the adequate profile of the Company in the dedicated garments manufacturing industry of Pakistan. The Company is primarily engaged in the manufacturing and export of knitted garments to cater for all tiers of society including Men, Women and Kids. The Crown Textile is a vertically integrated value-added Company which procures yarn and converts it into final garments through absolute in-house processing which includes (knitting, dyeing, printing, embroidery, washing, cutting, stitching, and so on). The financial strength of the Company mainly divests into the textile and real estate business held by a sole sponsor. The Company has no formal board and all delegation of authority matrix lies with the CEO and sponsor. The Company has generated a topline of PKR 8.4bln during FY23 (FY22: PKR 12.2bln), 100% contributed by export segment sales. The global recession, international demand & consumption patterns are the set forth factors behind the dip in export sales. However, as per the Crown management presentation, the demand pattern is expected to regain its lost momentum in the upcoming quarters. The Company enjoys long-term associations with several esteemed brands abroad namely Lamour Sports Inc, Primark Group, Terramar Sports Inc., and many others. The business generated in terms of export destination constitutes more than 50% by USA and remaining in Europe. During a time of three years, the Company sustained its gross margins but net margins were mainly impacted by magnifying finance costs. The Company has expanded their production capacities through the commercialization of the Landi Dyeing and washing facility and diversified its revenue streams through the opening of a denim factory. The Company expected to further expand their operations in the Nooriabad Facility as per the Crown textile management presentation. The financial risk profile of the Company is considered adequate with a leverage capital structure and a slightly stretched working capital cycle depicting the industry norm. The inflated finance cost has impacted the coverages and cash flows of the Company. The size of the textile industry in Pakistan is estimated to be PKR 2.62Trn (LSM)~3.0% of the total GDP as of FY23. The composite & garment segment in the textile sector contributes ~ PKR 1.6Trn mainly dominated by knitwear, readymade garments, bedwear and towels followed by PKR 775bln from spinning and PKR 637bln from weaving. The escalation in energy tariffs & finance costs, PKR devaluation, and ensuring the availability of optimum quality raw materials are prime challenges specific to the industry to assess the international market and stay price-wise competitive.
The ratings are dependent on the Company's ability to sustain its growth in business volumes while generating sufficient cashflows and maintaining the profitability matrix at an optimal level. The sustainability of margins and improvement in coverages while expanding business volumes remain critical. The adherence to the debt matrix at an optimal level is a prerequisite for the assigned rating. Improvement in the governance framework is considered important.

About the Entity
Crown Textile began as a small business in 2000 as a single-member company. The Company is principally engaged in the manufacturing and export of knitted garments. Crown produces more than 4mln ready-made garments every month including 50,000kgs of knitted raw fabric per day also 50,000kgs of dyed fabric per day. The ownership of the Company rests with the family of Mr. Muhammad Nadeem. The major shareholding of the Company is owned by Mr. Muhammad Nadeem (98%) and the rest is with his wife. The position of CEO is vested with Mr. Nadeem. He has an experience of more than 3 decades in the textile industry.