PACRA Maintains the Entity Ratings of Alhamd Corporation (Pvt.) Limited

The ratings of Alhamd Corporation (Pvt.) Limited (“ACL” or “the Company”) reflects its adequate positioning in Pakistan's spinning industry. The Company's principal activity is manufacturing and selling various categories of yarn. The Company has successfully commercialized production at Unit-II, which operates with 43,776 spindles at a capacity utilization of 97.0%. The total project cost is approximately PKR 6.9bln, primarily financed through a mix of subsidized borrowing from the State Bank of Pakistan (SBP) under the TERF scheme and conventional bank loans. This business strategy is poised to improve business volumes and cope with the evolving demand patterns and consumption trends in both domestic and international markets. The product slate of the Company mainly comprises PC, CVT, CT, and combed yarn. The sales portfolio of ACL is dominated by local sales with a minute contribution from the export segment. During 1QFY25, the management strategically adjusted the product portfolio and shifted its focus from finer yarn count to coarser yarn to address seasonal demand. This reaped benefits for the Company by maintaining its business volumes and the topline reflected a significant growth at PKR 4.7bln (1QFY24: PKR 3.8bln). The profit from core operations remained moderate compared to other industry players in dedicated spinning, primarily due to the procurement of raw materials at reasonable rates. However, this advantage was partially offset by rising energy costs. The management is cognizant of energy cost risk and intends to install an ~8 megawatt solar project which is expected to become operational by the end of June 2025. The magnified cost of funding to fuel extensive working capital requirements and amplified operational expenses led to a diminution in the Company’s profitability matrix. The Company booked a net loss of PKR 196mln compared to a net profit of PKR 26mln as of 1QFY24. ACL's funding structure primarily consists of approximately 55.0% short-term conventional debt, while the remaining portion is a mix of long-term conventional debt and subsidized borrowings from SBP, with a minor contribution from sponsor loans. The Company has maintained a leveraged capital structure. However, the financial risk profile of the Company is considered adequate with a stretched working capital cycle and dip in coverages. Looking ahead, the management of the Company is expecting to gain momentum by the end of fiscal year 2025 and intends to pursue no further expansion during the coming years.
The ratings are dependent on the Company’s ability to generate sufficient cash flows with optimization of its overall cost structure and funding matrix. The improvement in the coverages and maintenance of the Company’s financial risk profile at an optimal level is a prerequisite for the assigned ratings.

About the Entity
Alhamd Corporation (Pvt.) Limited, incorporated in 1983, operates as a private limited Company. The Company's manufacturing facility is located in Dera Ghazi Khan, a major cotton-growing area of Pakistan. The majority stake (74%) of the Company is vested with Sheikh Afzaal Ahmed, and his son, Mr. Asad Imdad Sheikh (25% stake). There are four board members, two from the sponsor family i.e., Sheikh Afzaal Ahmed and Mr. Asad Imdad Sheikh and the rest are the executive directors.