PACRA Upgrades Entity Rating of Rainbow Hosiery (Pvt.) Limited

Rainbow Hosiery (Pvt.) Limited (“RHPL” or “the Company”) is engaged in the manufacturing and export of home textiles and garments. Leveraging modern technology, the Company focuses on producing high-quality home textile products, with a core emphasis on fitted bedsheets made from a variety of materials including Lycra, Microfiber Interlock, Molton Polyester, and Cotton. In addition to home textiles, RHPL offers a diverse knitted garments portfolio comprising hooded jackets, creepers, polo shirts, and jogging suits, catering to a broad range of customer preferences and market demands. RHPL’s operations are partially integrated (Knitting, Dying & Stitching) enabling enhanced production efficiency and more effective cost controls. Over time, RHPL has undertaken multiple phases of capacity expansion. The Company’s primary production division is home textiles, accounting for approximately 86.4% of total exports. Europe represents the most significant export destination for these products. Garments contribute the remaining 13.6% of total exports, currently directed to the United States. However, the Company is actively exploring opportunities to expand its garment exports into the European market. As per the latest export data for 9MFY25, the textile industry recorded a value-wise growth of ~9.4%, with total exports reaching $13.6bln. Knitwear remained the top-performing segment, posting a value-wise growth of ~17% alongside a volumetric increase of ~9.2%. Similarly, Bed Wear and Readymade Garments registered volumetric growth of ~12% and ~8%, respectively, with corresponding value-wise growth of ~14% and ~19%. In-line with the trends, RHPL’s revenue surged to ~PKR 5.9bln during 6MFY25 (FY24: ~PKR 7.9bln), and translated into an annualized growth of ~49%. The growth in revenue was driven by increase in volumetric sales and price adjustments. However, margins sustained at all levels. The Company has established several operational and compliance-focused committees, including those for Emergency Response, Health & Safety, Environment & Waste Management, Work Council & Labor, and Fire Drill & Fighting. Each of these committees is supervised by an independent member, reflecting a structured approach to key operational areas. Currently, Governance structure depicts improvements, the board is family dominated, and lacks a formal structure, committees, and independent oversight. Additionally, the external auditors are only QCR-rated. While, on the compliance front, the Company maintains valid product and facility certifications and undergoes periodic audits by globally recognized bodies, including OEKO-TEX, Sedex, SANFOR KNIT Certificate, and Made in Green. Financial risk profile of the Company demonstrates sufficient cashflows, and appropriate net working capital cycle. However, RHPL’s equity base is modest.
The ratings are dependent on the firm’s ability to sustain its position amidst a changing business environment and management’s ability to run the operations of the Company optimally. With the upcoming growth in the firm’s business & volumes; a better governance, prudent financial discipline and implementation of a stringent control environment shall remain imperative.

About the Entity
RHPL, incorporated in 1992, is a private limited concern principally engaged in the manufacturing and exports of home textiles and garments. The board comprises two members of the Lodhia Family. Mr. Mohammad Shahid Lodhia manages the overall business affairs of ‘RHPL’ as the CEO while Mr. Mohammad Lodhia (son of Mr. Shahid Lodhia) is the managing director of the Company and possesses ample business experience.