PACRA Maintains Entity Ratings of Kohat Textile Mills Limited

Pakistan's spinning industry remains highly fragmented, with an estimated total size of ~PKR 775bln. The sector comprises around 368 dedicated spinning units, collectively boasting an installed capacity of ~13.4mln spindles as of FY24. Cotton production estimates have been revised to ~10.9mln bales; however, actual production reached only about 5.5mln bales, indicating an expected shortfall. For FY25, improved local cotton yields are anticipated to help reduce reliance on imports. Nonetheless, Pakistan’s imported cotton requirement has increased from roughly 3.5mln to 4mln bales for the current year. The recent hike in energy tariffs has further compounded challenges for the industry, impacting cash flow and liquidity. Despite some reduction in the financial charges, high working capital requirements have strained industry finances, leading to a 'Watch' status on outlooks.
Kohat Textile Mills Limited ("Kohat Textile" or "the Company") maintains a strong rating profile, primarily owing to its affiliation with Saif Group ("the Group"), which holds a significant presence across multiple sectors of the economy. As the Group’s first venture into the spinning industry, Kohat Textile holds strategic importance within the Group’s diversified portfolio. The Company specializes in yarn production and currently operates with a spinning capacity of 44,508 spindles, reflecting its substantial operational scale. Over the years, the Company has demonstrated consistent performance, maintaining a stable operational track record. Notably, during FY24, the Company experienced a significant revenue increase of ~33.8%. This growth was driven by improved demand, coupled with favorable prices. This led to an overall improvement in the Company’s financial performance. Margins and, inturn profits remain steady. The positive trend underscores the Company’s effective cost management strategy amid dynamic market environment. The Company has undertaken substantial capital expenditure (CAPEX) initiatives, notably for BMR activities of its existing facilities. The Company has invested in solar energy solutions, currently operating with a capacity of 3.6MW, which is expected to significantly reduce operational expenses over time. This strategic move aims to enhance energy efficiency. On the financial risk front, the Company remains adequately leveraged. However, the Company’s emphasize on adopting a cautious approach towards risk management, remains imperative alongside maintaining a competitive position within the industry.
The ratings are based on the Company's capacity to continue operating under the current circumstances. The ratings will be impacted if there is a significant decline in revenue and/or coverages as a result of the protracted downturn, which will increase financial risk. Support from Saif Group remains imperative to the ratings.

About the Entity
Kohat Textile Mills ("Kohat Textile" or "the Company") was incorporated in 1966 under the repealed Companies Ordinance,1984. The Company became commercially operational in 1967 to manufacture specialized yarn from polyester, viscose, and acrylic. It operates at an installed capacity of 44,508 spindles. Kohat Textile's ~77.89% ownership vests with Saif Group through Saif Holdings, followed by financial institutions (~9.91%), the general public (~11.66%), and the Directors (~0.45%). The Company's Board is chaired by Mr. Javed Saifullah Khan. While Mr. Assad Saifullah Khan heads the Company as the CEO. They are supported by a team of experienced professionals.