PACRA Maintains Entity Ratings of Siddiqsons Limited

The assigned ratings of Siddiqsons Limited (“SSL” or “the Company”) reflect its established position in Pakistan’s textile sector and its long-standing presence in the domestic denim industry. As the flagship entity of the Siddiqsons Group, SSL operates as a vertically integrated textile manufacturer with in-house operations spanning spinning, denim fabric, knitted fabric, denim garments, and towels. The integrated business model provides operational flexibility, facilitates quality control, and supports value addition across the production chain. The garment segment is fully export-oriented, with Kiabi — a France-based international fashion retailer — serving as the anchor buyer under a long-term supply arrangement. The Company’s export-oriented revenue base from other segments is also geographically diversified, with key export markets including Bangladesh, Turkey, and Europe. Over the years, the Company has undertaken capital expenditure (CAPEX) under its Balancing, Modernization, and Replacement (BMR) program, with a focus on enhancing production capacity, improving operational efficiency, and achieving horizontal expansion. In FY25, the topline witnessed a modest decline on account of subdued volumetric offtake amid challenging global demand conditions. During 6MFY26, the Company reported net sales of ~PKR12,413mln, comprising export sales of ~PKR7,720mln with remaining ~PKR4,692mln constituting local sales. The Company maintains a diversified export footprint, with key markets including Bangladesh, Turkey, and Europe. The estimated revenue impact of the US reciprocal tariff headwind was ~PKR250mln, partially absorbed through order re-routing and pricing adjustments. Profitability indicators remained broadly stable during the period under review. Gross margins sustained their levels, while operating profitability continued to reflect the impact of elevated operating expenses and muted export realizations experienced during the period. Net profitability improved, supported primarily by lower finance costs as the SBP policy rate declined from a peak of ~22% to ~10.5%, materially easing working capital financing costs. In addition to its core textile operations, the Company maintains an investment portfolio comprising real estate and equity holdings in listed companies — including a Material stake in MCB Bank Limited — generating recurring dividend and rental income that provides supplementary support to earnings. The Company's investment in a ~7MW solar power plant and a ~10MW gas engine supports energy diversification, partially insulating from elevated Captive and grid electricity costs, while ensuring productive continuity. The working capital cycle remained relatively extended due to strategic inventory holdings required to support export commitments, consistent with the operating dynamics of export-oriented businesses. The liquidity indicators remained adequate. The financial risk profile improved during the review period, supported by lower borrowing levels, reduced financing costs, and improved debt servicing capacity. The textile sector remains a key contributor to Pakistan's exports, supported by value-added products and improving demand from key international markets, alongside favorable tariff positioning. However, the sector continues to face challenges from high energy costs, reduced domestic cotton production (~12.5mln to ~5–6mln bales), increased reliance on imports, and elevated cotton prices of ~PKR22,000–23,000 per maund.
The ratings remain dependent on the Company’s ability to strengthen its profitability profile while sustaining business volumes. Maintaining prudent working capital management, generating adequate cash flows from core operations, preserving comfortable coverage indicators, and keeping leverage at manageable levels remain important considerations for the assigned ratings.

About the Entity
Siddiqsons Limited (“SSL” or “the Company”), incorporated in 1987, in Hub and Karachi, with ~32,198 spindles and ~318 looms, producing ~37.5 million meters of denim fabric annually. The 4-member Board of Directors, without independent or non-executive directors, oversees the company. Mr. Tariq Rafi, Chairman and CEO, has received the Sitara-e-Imtiaz award. His son, Mr. Abdul Rahim, is the COO, supported by an experienced management team.