PACRA Maintains the Entity Ratings of US Denim Mills (Pvt.) Limited

The ratings of US Denim Mills (Pvt). Limited (“UDML” or “the Company”) reflects the well-established business profile of the sponsors within the competitive textile landscape. This stems from the Company’s affiliation with one of the leading textile exporters in Pakistan, US Group, operating in four business verticals: Apparel, Fabric, New ventures & Logistics. The sponsoring group aims to achieve growth by safeguarding its core business and diversifying into promising sectors while maintaining a strong governance framework to ensure long-term sustainability. The Company serves as the fabric vertical of the US Group, specializing in the manufacturing and selling of denim fabric. The Company has implemented streamlined manufacturing operations to enhance production efficiency and optimize the facility's control environment. During FY24, the Company’s topline grew by 34.6%, reaching PKR 29.6bln (FY23: PKR 22.0bln), driven by a substantial improvement in capacity utilization and increased business volumes. Indirect exports are the major revenue contributor, accounting for 64.8% of total revenue, with a significant portion derived from intra-group (captive) business. Direct exports have a notable contribution of 32.7%, with multiple export destinations, including Sri Lanka, Egypt, Bangladesh, Turkey, etc. The Company has a subsidiary in Turkey, named Us Fashion Turkey Tekstil Ticaret Anonim Sirketi, augmenting the accessibility in international markets by exploring new export avenues, mainly in Europe. Margins were squeezed due to competitive pricing pressures in USD terms, rising energy tariffs, and revised minimum wage rates. The Company secured a bottom line of PKR 1.5bln (FY23: PKR 2.8bln). The group consciously avoids leveraging, a strategic decision overseen by sponsors who provide guidance and professional management to group companies that benefit the Company’s financial risk profile. The Company has minimally utilized short-term borrowings under the Musharakah EFS scheme and has secured an interest-free loan from its group companies to support its working capital requirements. The Company maintains a favorable capital structure, with efficient working capital management, sufficient cash flows, and strong coverages, signifying sound credit quality metrics.
The ratings are dependent on the Company’s ability to maintain a strong business profile amidst current circumstances while continuing to generate sufficient cash flows, stable topline, and profitability. Preserving low-leveraged capital structure and sound coverages remain imperative.

About the Entity
US Denim Mills (Pvt). Limited is a private limited Company incorporated on January 18, 2005. It is a wholly owned subsidiary of AJ Holding (Private) Limited. The Company’s operational infrastructure comprises a weaving unit with 229 air jet looms and 20 power looms.
The Company has a ten-member board with the presence of sponsors and their families. The position of CEO is vested in Mr. M. Irfan Nazir Ahmed. He has twenty-six years of professional experience and holds an MBA qualification.