PACRA Maintains the Entity Ratings of Fazal Cloth Mills Limited

Fazal Cloth Mills Limited (“FCML” or “the Company”) is a prominent name in Pakistan’s spinning sector. The Company has developed a diversified product portfolio catering to both domestic and international markets. FCML specializes in the production of greige fabric and a wide range of yarn products, including multi-count/multi-twist, double, zero-twist, organic, Supima, Lycra, Giza, and USA cotton yarns. The Company benefits from a longstanding operational track record, supported by continued investment in advanced production mechanisms. On the strategic front, management is pursuing a volume-led growth strategy, with an emphasis on enhancing revenues and market penetration through its existing product portfolio rather than undertaking diversification into new business ventures.

During 9MFY26, FCML achieved a topline of PKR 71.6bln (9MFY25: PKR 69.0bln). The revenue growth was primarily driven by a strategic shift towards the domestic market, enabling the Company to capitalize on relatively higher demand for yarn and achieve healthy growth in overall sales volumes. Yarn remained the Company’s principal revenue contributor, followed by greige fabric. FCML’s competitive positioning is further supported by its energy diversification initiatives, including its arrangement with Fatima Energy Limited and cumulative investment in approximately 54MW of solar to mitigate the Company’s exposure to volatility in energy costs. Despite these initiatives, core profitability witnessed a slight decrease, primarily due to relatively subdued product prices. Nevertheless, the Company’s profitability was supported by non-core income generated from investments in Term Deposit Receipts (“TDRs”), alongside relatively lower finance costs and taxation charges. Consequently, the Company reported a net profit of PKR 356mln during 9MFY26, compared to PKR 382mln during 9MFY25.

The Company meets its working capital requirements through a combination of internally generated cash flows and short-term borrowings. FCML’s financial risk profile is considered adequate, albeit characterized by a relatively stretched working capital cycle, which is broadly reflective of industry dynamics. Management is pursuing a well-articulated financial strategy aimed at maintaining leverage within a moderate range while strengthening the Company’s liquidity buffer. In this regard, the Company has restructured its debt profile to achieve a flexible repayment structure while maintaining adequate access to credit facilities from banks and financial institutions. These measures have contributed to a gradual improvement in the Company’s coverage metrics. Going forward, FCML intends to focus on improving operational efficiency and optimizing its existing production infrastructure through Balancing, Modernization, and Replacement (“BMR”) initiatives. No major capacity expansion is currently envisaged in the near term.
.
The ratings take comfort from the robust business profile of the sponsoring groups. The sustainability of the Company’s profitability matrix while expanding business volumes remains essential. Any deterioration in the Company’s financial risk profile will have a negative impact on the assigned ratings.

About the Entity
FCML is a listed concern, incorporated in 1966. The Company’s operational infrastructure comprises 275,724 spindles, 8,820 open-end rotors, 1,752 MVS spindles/rotors, 119 doubling machines, and 224 air-jet looms strategically divested across eleven manufacturing facilities in Multan and Muzaffargarh. The Company’s major stake is owned by the Fazal Group and Fatima Group (~44.6% each). The remaining shareholding rests with financial institutions (6.8%) and others (4.0%). The Company’s board comprises nine members. The CEO, Mr. Rehman Naseem, is supported by a team of highly qualified and seasoned professionals.