PACRA Revises Entity Ratings of Roomi Fabrics Limited

Roomi Fabrics Limited (“the Company” or “RFL”) has experienced a rise in its risk profile. This is an outcome of both deterioration in the Company’s business fundamentals plus dilution in its financial metrics. The textile in general is facing challenges, though its impact on different players have transpired differently, based on the agility of the sponsors and quick adjustments in the business model. The Company sustained losses during FY25, which have significantly eroded its equity base, resulting in liquidity pressures and a pronounced debt overhang. RFL is currently confronted with two key challenges: (i) a decline in sales volumes in the yarn and fabric segments, leading to underutilization of installed capacity; and (ii) increased reliance on short-term borrowings to bridge funding gaps, contributing to elevated finance costs.
The Company adopted a diversification strategy to combat the challenges prevailing in the sector. It has set up a stitching unit in Quaid-e-Azam Business Park, Sheikhupura. The new setup was a leveraged expansion. The plant is functional, yet the timely provision of full working capital could not be arranged to help achieve optimal capacity utilization. The finance cost further impacted the profitability. The related debt payments are also a challenge, since the optimum cash flow generation has not yet happened. The Company’s overall working capital is elongated. Inventory levels are high, requiring a higher level of short-term borrowings. Lately, the key sponsor passed away. Mr. Khawaja Najam is leading the group. He is making efforts to streamline the affairs and put the group back on the recovery path.
During FY25, the Company reported a topline of PKR 22.4 billion (FY24: PKR 25.3 billion), reflecting a contraction in revenues. The revenue mix has undergone a noticeable shift from a largely export-oriented base toward a more balanced sales composition. From a segmental contribution and profitability standpoint, the cloth segment remains the primary value driver for the Company, followed by spinning, home textile, and terry segments. During the review period, the Company’s profitability profile weakened, with RFL reporting a net loss of PKR 838mln. The loss was mainly attributable to subdued product pricing, relative stability in the USD exchange rate, elevated energy tariffs, and significantly higher finance costs. Collectively, these factors adversely impacted margin performance. Enhancing the business volume and improving margins are required. Meanwhile, a proper business plan and financial strategy need to be defined to ensure the recovery. The governance framework is characterized by active involvement of the sponsoring family, whose sector experience and operational oversight provide strategic direction to the Company. RFL continues to rely predominantly on imported raw cotton from the USA, Brazil, and Tanzania to achieve the required product quality and meet customer specifications across the cloth, terry, and home textile segments.
The ratings are dependent upon the Company’s ability to improve its performance in terms of business volumes and core profitability from its operations. Maintaining optimal capacity utilization, generating sufficient cash flows, and improving coverage ratios remain critical to the ratings. The adherence to an improved debt matrix is a prerequisite for the ratings.

About the Entity
Roomi Fabrics Limited is a venture of Masood -Roomi Group, which was established in 2021; previously, it was part of the Mahmood Group till 2021. Overall control vests with five board members, three of whom are from the sponsoring family. Mr. Khawaja Jalaluddin Roomi (late) was the Chairman of the Company with more than 30 years of experience in the textile industry. The new Chairman is yet to be appointed. The senior management is supported by a team of seasoned professionals who work under various sub-divisions to ensure efficiency.