PACRA Assigns Initial Entity Ratings to East Gate Industries (Pvt.) Limited

The assigned ratings reflect East Gate Industries (Pvt.) Limited’s (“EGI” or “the Company”) strong presence in Pakistan’s textile sector, operating as a multi-brand manufacturer and retailer with a diversified portfolio comprising eight major brands in apparel (formal, semi-formal, and casual), home furnishings, children’s wear, lifestyle accessories, hospitality, and toys. The ratings find comfort from the Company's robust retail presence in key metropolitan centers, including Lahore, Karachi, and Islamabad. EGI is also actively exploring high-potential international markets, a move expected to enhance business volumes, support revenue diversification, and strengthen the Company’s long-term business sustainability. Simultaneously, management is actively engaging with potential franchise partners in Australia and the USA, underscoring the growing international demand for its Eastern-inspired products. EGI has also maintained a modest investment book of PKR 3.8bln (FY24: PKR 3.4bln) to provide a steady stream of non-operating income and liquidity support. The investment portfolio primarily comprises low-risk, short-term avenues, consistent with the Company’s conservative investment philosophy and its focus on capital preservation. Oversight of these investments rests with the Investment Committee, which ensures adherence to defined risk parameters and alignment with the Company’s broader financial strategy. In line with the expansion strategy and proactive management approach, EGI has undertaken two major capital projects, the construction of a multi-story corporate headquarters and the implementation of a comprehensive solarization plan across its retail network and manufacturing facilities. Concurrently, the Company is transitioning from a franchise-based retail model to Company-owned outlets, aiming to ensure uniform service quality, strengthened operational control, and reinforced brand integrity. These initiatives are expected to yield long-term benefits through enhanced brand positioning within the competitive retail landscape. During FY25, EGI posted a revenue growth of 10.6%, reaching PKR 30.1bln (FY24: PKR 27.2bln), driven primarily by its flagship brands - Bareezé and Minnie Minors. While, the cost efficiency remained on the higher end with a gross margin of 51.8% (FY24: 52.4%), the bottom line witnessed a decline due to the upward revision in wage rates and the continuation of adverse taxation measures implemented in the preceding fiscal year, leading to a contraction in net profits to PKR 2.7bln (FY24: PKR 3.4bln) with a net profit margin of 9.1% (FY24: 12.6%). The Company’s financial risk profile remains adequate, albeit constrained by a stretched working capital cycle. Working capital requirements are primarily funded through a combination of internally generated cash flows and short-term credit facilities. The Company maintains a low-leverage capital structure, coupled with modest cash conversion efficiency over the past years. Debt service coverage and financial expense ratio improved to 14.6x (FY24: 6.1x) and 1.0% (FY24: 4.1%), respectively, reflecting an adequate debt coverage capacity and low exposure to interest rate risk, aided by the downward adjustment in policy rates during the year.
The ratings are dependent on the Company’s sustained operations and consistent incline in business volumes. Prudent working capital management and sufficient cash flows/profitability from core operations, while maintaining comfortable debt coverages, remain critical. The adherence to the optimal debt matrix is a prerequisite for assigned ratings.

About the Entity
East Gate Industries (Pvt.) Limited (“EGI” or “the Company”) was incorporated in Pakistan in 2014 under the Companies Ordinance 1984 as a Private Limited Company. Following the demerger from Sefam & Ali Group of Industries, Ms. Seema Aziz holds the majority share, with 83.34%, while Mr. Tariq Zaman and Ms. Ambreen Zaman each hold an equal stake of 8.33%. EGI owns many well-known retail brands, including Bareezé, Bareezé Man, Minnie Minors, Chinyere, Home Expressions, Rang Ja and The Entertainer. The Company operates around 350 retail outlets.