PACRA Maintains Entity Ratings of Siddiqsons Limited

The assigned rating of Siddiqsons Limited (“the Company” or “SSL”) reflects its established presence within Pakistan’s textile sector and its status as a pioneer in the domestic denim industry. As the flagship entity of the Siddiqsons Group, SSL operates as a vertically integrated textile manufacturer, with in-house capabilities spanning the entire value chain—including Spinning, Denim Fabric, Knitted Fabric, Denim Jeans and Towel. The Company’s integrated operations support streamlined production processes and enable enhanced oversight of quality standards. During FY24, the Company recorded topline growth of ~16.3% YoY, primarily driven by a volumetric increase in sales, with adequate product price dynamics. The weaving segment contributed approximately 48.0% to the Company’s topline, followed by the garments division at around 34.0%. The remaining revenue was derived from the towel, spinning, and knitted fabric segments. The Company’s export-oriented revenue base is geographically diversified, with key export markets including Bangladesh, Turkey, and Europe. Despite topline growth, gross margins declined, primarily due to the stabilization of the USD exchange rate, which limited export-related gains, and a significant rise in energy costs driven by elevated gas tariffs. The Company’s net margins were diluted due to elevated finance costs, impairment charges, and the share of loss from investments in associates. SSL maintains an investment portfolio comprising real estate and equity holdings in blue-chip companies listed on the stock exchange. This portfolio generates recurring dividend and rental income, creating an additional income stream for the Company and contributing positively to the bottom line. Over the years, the Company has undertaken capital expenditure (CAPEX) under its Balancing, Modernization, and Replacement (BMR) program, with a focus on enhancing production capacity, improving operational efficiency, and achieving horizontal expansion through the addition of new product lines. As a result, operating fixed assets have grown to PKR 12.1bln. The Company’s financial risk profile is considered adequate, with credit quality metrics expected to improve in the upcoming quarters as per the management presentation. SSL maintains a moderately leveraged capital structure, underpinned by adequate coverages and cash flows. The assigned ratings also incorporate the financial profile and demonstrated track record of the sponsoring family, which provides an element of stability and strategic continuity. The textile industry is grappling with several key challenges, including evolving global demand and consumption trends, alongside mounting pressures on price competitiveness. These pressures stem from a revision in the minimum wage, elevated energy tariffs, which despite a reduction, remain high in regional comparison, reliance on imported cotton due to an 18% GST on local procurement, and the looming imposition of a 29.0% reciprocal tariff on exports to the United States, currently deferred for 90 days.
The ratings are dependent on the Company’s ability to improve the profitability matrix while expanding business volumes. The prudent working capital management and generating sufficient cash flows from core operations while maintaining comfortable coverages remain critical. The adherence to debt matrix at an optimal level is a prerequisite for assigned ratings.

About the Entity
Siddiqsons Limited, incorporated in 1987, produces and sells denim yarn, fabric, and garments. The vertically integrated textile unit operates in Hub and Karachi, with 32,198 spindles and 318 looms, producing ~37.5 million meters of denim fabric annually. The 4-member Board of Directors, without independent or non-executive directors, oversees the company. Mr. Tariq Rafi, Chairman and CEO, has received the Sitara-e-Imtiaz award. His son, Mr. Abdul Rahim, is the COO, supported by an experienced management team.