PACRA Maintains Entity Ratings of Khas Textile Mills (Pvt.) Limited

Pakistan's yarn production grew by ~7.6% in FY25, recovering from a two-year decline, with modest growth expected to continue into FY26. However, the sector still faces significant challenges, as evidenced by a negative net profit margin of -0.8% in 9MFY25. A key risk is the increasing reliance on imported cotton, which accounts for ~35% of the supply and is more expensive than local cotton, leading to an increase in the raw material costs and impact on profit margins. While recent policy changes—like removing the GST exemption for exporters—may benefit local producers and a reduction in interest rates offers some relief, sustained recovery is contingent on managing raw material costs and increasing yarn offtake to manage fixed costs.
Khas Textile Mills (Pvt.) Limited ("Khas Textile" or "the Company") manufactures a range of cotton rings and open-end yarns. As an evolving player in the industry, the company maintains an adequate business profile, supported by its affiliation with the stable Khas Group, which has diversified interests in textile, energy, and other sectors. In FY25, the Company’s revenue fell by ~36.5% to PKR 3,937mln (FY24: PKR 6,199mln). Despite this, business margins improved to ~15% (FY24: ~10.4%) due to enhanced cost management and operational efficiency. However, net margins increased slightly to ~0.5% (FY24: ~0.4%), resulting in a net profit of PKR 19mln, primarily due to tax impacts. The Company's financial risk remains high, marked by substantial borrowings for working capital and significant related-party exposure, which has strained its overall financial health. Coverages remain stretched. Strengthening its governance framework is crucial for future ratings.
The ratings depend upon the management’s ability to improve margins, profitability, and the Company's financial profile. This includes keeping the debt levels manageable and improving the Company's business profile. Improvement in the governance framework remains important for the ratings.

About the Entity
Khas Textile Mills (Pvt.) Limited (“Khas Textile” or “the Company”), incorporated in 2001 as a private limited company. The Company is into manufacturing various types of cotton rings and open-end yarn and operates 19,200 spindles and 864 rotors at a purpose-built facility in Nooriabad, Karachi.
The Company is wholly owned by the sponsoring family, with Mr. Khurram Ashfaq and Mr. Noman Ashfaq holds ~33% of the shares each. The remaining ~34% is evenly split between Mrs. Saira Noman and Mr. Muhammad Muneeb Ashfaq, who each hold ~17%. Mr. Ashfaq Ahmed is the Chairman of the Board, while Mr. Khurram Ashfaq, the Managing Director. He is supported by an experienced management team.