PACRA Maintains Entity Ratings of A.J. Textile Mills 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.
The assigned ratings of AJ Textile Mills Limited ("AJ Textile" or "the Company") gather support from its affiliation with the Aziz Group, holding a diverse presence across textiles, FMCG, and chip-board production. The Company, a key part of the Group, operates with a yarn production capacity of 113,264 spindles. The ratings reflect the Company’s consistent and sustained improvement in its business risk profile. For the 6MFY25, AJ Textile’s top-line increased by ~2.5% to ~PKR 8bln, primarily driven by strong local sales (~92%) and supported by an increase in yarn prices. Profitability and margins also improved due to effective management of procurement expenses. AJ Textile has installed a 10MW solar energy project and plans to expand it further in the future. On the financial risk front, the Company maintains adequate cash flow to meet its obligations and benefits from reduced borrowing exposure, which has led to a strong capital structure and sound working capital management. Nonetheless, strong acumen and demonstrated financial support from the sponsors bode well for the Company. Streamlining the governance framework remains important to the ratings.
The ratings are dependent on management's ability to sustain growth in revenues, margins, and profitability. Maintaining a prudent working capital, along with sufficient cash flows and coverage ratios, is imperative. Additionally, an improved governance structure and the alignment of the company's performance with its financial projections are vital for the ratings.

About the Entity
A.J. Textile Mills ("AJ Textile" or "the Company") commenced operations in 1993 as a private limited company. The Company manufactures yarns with an installed capacity of 113,264 spindles.
The Company's ownership vests with the sponsoring family, Mr. Mohsin Aziz (~65%), followed by Mr. Afan Aziz (~34%), Ms. Sahiba Imtiaz (~0.7%) and Ms. Huma Mohsin (~0.03%). The Company's Board is chaired by Mr. Mr. Mohsin Aziz. While, Mr. Afan Aziz heads the Company as the CEO. They are supported by a team of experienced professionals.