PACRA maintains Entity Ratings of Gul Ahmed Textile Mills Limited

The assigned ratings of Gul Ahmed Textile Mills Limited (“GATM” or “the Company”) reflect its longstanding operating history and established position as one of Pakistan’s leading players in the textile sector. As the flagship entity of Gul Ahmed Group, the Company operates as a fully vertically integrated textile unit, encompassing the entire value chain from spinning to finished textile products. Its state-of-the-art manufacturing facilities, equipped with modern machinery and advanced automation systems, enable adherence to high international quality standards and operational efficiencies. GATM’s diversified product portfolio includes yarn, dyed yarn, fabric, bleached fiber, home textiles, and other textile products. From a segmental perspective, the home textile division holds a dominant position in terms of revenue contribution, while the spinning segment remains a key driver of profitability. Pakistan’s spinning industry continues to operate under a stressed environment. However, the Company has demonstrated resilience in its export performance. Export sales grew consistently over the past three years, positioning GATM among the top textile exporters in the country. During 1HFY26, the Company generated revenue of PKR 69.9bln (1HFY25: PKR 81.6bln), with around 73.3% derived from direct export sales, reflecting its strong orientation toward international markets. As a strategic maneuver, the Company exited its apparel exports segment to focus on profit-accretive segments only. The bottom line of the Company witnessed a consistent contraction with net margins in FY25 at 2.5% (FY24: 3.3%) and during 1HFY26 at 0.6%, attributable to elevated labor and energy costs. The Company’s cost structure and profitability remain sensitive to several external factors, including USD exchange rate, product pricing dynamics, rising energy tariffs, and upward revisions in minimum wages. As per management’s representation, the Company has undertaken multiple initiatives to enhance energy efficiency and reduce reliance on conventional power sources. In this regard, the Company has invested in a 20MW solar power plant along with an 11.6MWh battery energy storage system, financed through long-term borrowings. Additionally, the Company is investing in a 10MW wind power project and an additional 11MW solar capacity, with these projects expected to become operational by the first quarter of FY27. Furthermore, the Company is in the process of partially shifting its spinning capacity to Nooriabad, where it plans to install 7.5MW wind capacity, 6MW solar capacity, and a 20–25MWh battery energy storage system. Through these initiatives, the Company aims to meet ~50% of its total power requirements through renewable energy sources. The Group’s retail operations are conducted through Ideas (Pvt) Limited, a premium fashion and lifestyle brand. Management is consolidating retail outlets to streamline costs and converting selected locations into experience-oriented stores to enhance customer engagement, while also expanding market share through e-commerce initiatives. The Company’s financial risk profile is considered adequate but remains constrained by stretched working capital and weakened coverage indicators. The capital structure is highly leveraged, largely supported by short-term borrowings, which increases refinancing and liquidity pressures. However, management has demonstrated a commitment to reducing leverage in the near term.
Going forward, the assigned ratings remain contingent upon GATM’s ability to strengthen its business risk profile through sustained improvement in profitability metrics. Enhancement in margins and coverage ratios, alongside disciplined growth in business volumes, will remain critical to maintaining and potentially improving the rating trajectory.

About the Entity
Gul Ahmed Textile Mills Limited (“GATM” or “the Company”) is listed on PSX and commenced operations in 1953. The majority shareholding lies with Gul Ahmed Holdings (Pvt.) Limited (~55.86%). The Board comprises seven directors including four members of the sponsor's family, one non-executive, and two independent directors. The CEO, Mr. Mohammed Zaki Bashir, oversees the Company's affairs.