PACRA Maintains the Entity Ratings of Zahidjee Textile Mills Limited

Zahidjee Textile Mills Limited (“ZTML” or “the Company”) is an emerging player in Pakistan’s textile industry. The Company operates as a vertically integrated unit, specializing in various categories of yarn (with counts ranging from 8s to 52s), fabric and made-ups. In the preceding years, the Company undertook phased expansions, enhancing its overall production capacity to 150,084 spindles, financed through a debt-to-equity mix of 70:30. This expansion bolstered overall sales volumes, reflecting positively on the Company’s business profile.

The topline demonstrates consistent growth, supported by a strong and diversified customer base. A substantial portion of revenue is derived from domestic sales, contributing PKR 34.6bln in FY25 (FY24: PKR 32.2bln). This growth was underpinned by a prudently managed cost structure and favorable product pricing dynamics for yarn. In the local market, the Company’s foremost product is medium-count yarn, while hospital bed sheets remain the top-selling product in the international market. The funding matrix of the Company revolves around the strategic allocation of funds to short-term investments in term deposit receipts, which supplement the liquidity profile and augment net profitability through the inflow of interest income. Additionally, the sponsors manage several investment properties available at their disposal in case any need may arise.

The top customers of ZTML comprise well-established and prominent players within the textile industry. The margins reflect an improvement primarily due to upfront cotton procurement at reasonable prices. Additionally, the strategic allocation of surplus funds to money market investments, along with monetary easing, further supported net profitability. On the strategic side, management is keenly focused on the spinning segment and intends to grow by capitalizing on the rising demand from domestic markets. The Company funds its working capital requirements through internally generated cash flows and short-term debt, alongside sponsor loans.

The ratings take comfort from the Company’s adequate financial risk profile, supported by an efficiently managed working capital cycle and a moderately leveraged capital structure. Cash flows have improved, while the Company’s coverage indicators have shown a modest recovery. Continuous investments in expansion and BMR activities under the subsidized TERF facility have enabled the Company to maintain an ample production capacity. Currently, the management does not intend to pursue any further expansion.
The ratings are dependent on the sustainability of business operations alongside the continued expansion of volumes. The maintenance of profitability from core operations and improvement in coverage indicators remain essential. Any deterioration in the Company’s financial risk profile will have a negative impact on the assigned ratings.

About the Entity
Zahidjee Textile Mills Limited (“ZTML” or “the Company”) is a public limited company, incorporated in Pakistan on July 17, 1990. The major stake in the Company (~96.6%) is held by the sponsors, Mr. Ahmad Zahid (~75.0%) and Mr. Muhammad Zahid (~21.6%). The remaining stake is held by the general public (~2.1%) and others (~1.3%). The board comprises four independent directors, two executive directors and one non-executive director.