PACRA Maintains its Entity Ratings to Sarena Textile Industries (Pvt.) Limited:

The rating reflects the prominent profile of Sarena Textile Industries (Pvt.) Limited (“the Company” or “STIL”) in the textile industry of Pakistan. The core operating activity of the Company is manufacturing and exporting fabrics and apparel. STIL is a semi-vertically integrated textile company, featuring in-house facilities for dyeing/processing, weaving, and garment production. STIL has carved out a market for itself by processing and manufacturing specialized materials for uniform and fire protection. The company is also a licensee for PROBAN® in Pakistan. The product slate is primarily vested in the fabric; dyed and printed followed by the garments. The top line of the Company has shown annual growth of 12% and stood at PKR 26bln as of 9MFY24 (9MFY23: PKR 23.2bln) mainly dominated by exports of fabrics. However, price inflation on local raw cotton, soaring energy costs, and elevated finance costs have heavily impacted the margins and profitability matrix of the Company. The clientele of STIL consists of established entities situated across various export destinations worldwide, primarily in the European market. This has bolstered the Company's business sustainability. The management remains diligent in aligning financial performance with projections. The execution of CAPEX for solar installation is executed to manage escalating energy cost risk. The board of the Company is sponsor-dominated with moderate size and board members possess considerable industry-specific exposure, supported by a team of seasoned and professional management. The financial risk profile of the Company is considered adequate with a stretched working capital cycle depicting industry norms. The working capital requirement of the Company is met through a mix of internally generated cashflows and short-term borrowings. The company has maintained a leveraged capital structure with adequate coverages and cashflows. The rating incorporates financial strength and a proven track record of sponsoring family. The size of the textile industry in Pakistan is estimated to be PKR 2.62Trn (LSG) ~3.0% of the total GDP as of FY23. The composite & garment segment in the textile sector has a contribution of ~ 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 operations in prevailing conditions. Prudent working capital management and generating sufficient cashflows/profitability from core operations while maintaining comfortable coverages remain critical. The adherence to the debt matrix at an optimal level is a pre-requisite for assigned ratings.

About the Entity
Sarena Textile Industries (Private) Limited is part of the Sefam and Ali Group of Industries. The Company has its plant located at Sheikhupura Road. The Company has 185 Looms inclusive of 100 Toyota Air Jet looms and 85 Sulzer Air Jet looms. Mr. J.A Zaman (late) founded Ali Embroidery Mills (Private) Limited in 1972, which later became the launching pad for the Sefam & Sarena Group of Industries. The majority of the ownership lies with Mr. Hamid Zaman, who is educated at a prestigious university and has a diverse background in the textile industry. The operations of the company are looked after by the Chief Executive Officer, Mr. Asif Masood.