A.J. Textile Mills Limited

CREDIT RATING REPORT | Sep-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
26-Sep-25 A- A2 Stable Maintain -
08-Oct-24 A- A2 Stable Maintain -
11-Oct-23 A- A2 Stable Maintain -
12-Oct-22 A- A2 Stable Maintain -
12-Oct-21 A- A2 Stable Initial -
About the Entity

A.J. Textile Mills ("AJ Textile" or "the Company") commenced operations in 1993 as a private limited company. The Company manufactures yarns with an installed capacity of 113,264 spindles.
The Company's ownership vests with the sponsoring family, Mr. Mohsin Aziz (~65%), followed by Mr. Afan Aziz (~34%), Ms. Sahiba Imtiaz (~0.7%) and Ms. Huma Mohsin (~0.03%). The Company's Board is chaired by Mr. Mr. Mohsin Aziz. While, Mr. Afan Aziz heads the Company as the CEO. They are supported by a team of experienced professionals.

Rating Rationale

Pakistan's yarn production grew by ~7.6% in FY25, recovering from a two-year decline, with modest growth expected to continue into FY26. However, the sector still faces significant challenges, as evidenced by a negative net profit margin of -0.8% in 9MFY25. A key risk is the increasing reliance on imported cotton, which accounts for ~35% of the supply and is more expensive than local cotton, leading to an increase in the raw material costs and impact on profit margins. While recent policy changes—like removing the GST exemption for exporters—may benefit local producers and a reduction in interest rates offers some relief, sustained recovery is contingent on managing raw material costs and increasing yarn offtake to manage fixed costs.
The assigned ratings of AJ Textile Mills Limited ("AJ Textile" or "the Company") gather support from its affiliation with the Aziz Group, holding a diverse presence across textiles, FMCG, and chip-board production. The Company, a key part of the Group, operates with a yarn production capacity of 113,264 spindles. The ratings reflect the Company’s consistent and sustained improvement in its business risk profile. For the 6MFY25, AJ Textile’s top-line increased by ~2.5% to ~PKR 8bln, primarily driven by strong local sales (~92%) and supported by an increase in yarn prices. Profitability and margins also improved due to effective management of procurement expenses. AJ Textile has installed a 10MW solar energy project and plans to expand it further in the future. On the financial risk front, the Company maintains adequate cash flow to meet its obligations and benefits from reduced borrowing exposure, which has led to a strong capital structure and sound working capital management. Nonetheless, strong acumen and demonstrated financial support from the sponsors bode well for the Company. Streamlining the governance framework remains important to the ratings.

Key Rating Drivers

The ratings are dependent on management's ability to sustain growth in revenues, margins, and profitability. Maintaining a prudent working capital, along with sufficient cash flows and coverage ratios, is imperative. Additionally, an improved governance structure and the alignment of the company's performance with its financial projections are vital for the ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

A.J. Textile Mills Limited

rating analysis

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Profile
Legal Structure

A.J. Textile Mills Limited ('A.J. Textile' or 'the Company') was incorporated in 1992 as a private limited company under the repealed Companies Act'17.


Background

A.J. Textile was the first initiative by the Aziz Group of Industries (the Group) in the spinning sector. The Group holds presence across multiple sectors, including textiles (yarn production), FMCG (match manufacturing), real estate (AJ Tower), and the production of laminated boards and particle chipboards.


Operations

The Company specializes in the manufacturing and sale of different varieties of yarn, operating through two units with a combined installed capacity of 113,264 spindles. The energy requirements are fulfilled through multiple sources, including a 9MW solar power plant, with 4.5MW generated from renewable energy. The remaining energy is supplied by PEDO, PESCO, and genset. The Company's registered office is located at Industrial Estate, Peshawar, while manufacturing units are located in Industrial Estate, Gadoon Amazai, Sawabi.


Ownership
Ownership Structure

AJ Textile's ownership vests with the sponsoring family: Mr. Afan Aziz (~65%), followed by Mr. Mohsin Aziz (~34%), Ms. Sahiba Imtiaz (~0.7%) and Ms. Huma Mohsin (~0.03%).


Stability

Ownership stability is ensured with the majority stake residing with the sponsoring family. However, there is no formally documented succession plan.


Business Acumen

The Group formally came into existance in 1940's and holds interests in various ventures across textile and allied. The Group has adequately expanded its operations with the sponsors having an experience of more than six decades.


Financial Strength

AJ Textile Mills Limited remains the prime cash generating venture of the Group. However, holds interests in Mohsin Match Factory (Pvt.) Limited, AJ Match (Pvt.) Limited, Premier Formica Industries Limited, Premier Chipboard (Pvt.) Limited, and Premier MDF (Pvt.) Limited, along with Aziz Ice Factory and Cold Storage. The Group holds stable financial muscle and the sponsors are willing to support the Company, if need be.


Governance
Board Structure

Overall control of the Board vests with the sponsoring family. The Board comprises one Executive Director and three Non-Executive Directors. Independent oversight may add strength to the governance frameowrk.


Members’ Profile

Mr. Mohsin Aziz, Chairman of the Board, brings over four decades of industrial experience and has previously served as a member of Pakistan's Senate. His leadership is complemented by Mr. Afan Aziz, who contributes over two decades of industrial expertise. They provide strategic direction and seasoned oversight to the Company.


Board Effectiveness

The Board has formed two committees, Audit and HR ,to assist the Board on relevant matters. However, the absence of a structured system for recording Board meeting minutes highlights a need for improvement in the overall governance framework.


Financial Transparency

The External Auditors of the Company, M/s. RSM Avais Hyder Liaquat Nauman, Chartered Accountants, has expressed an unqualified opinion on the financial statements of the Company for FY24. Audit for Jun-25 is still in process. The firm is QCR rated and in 'A' category of auditors.


Management
Organizational Structure

The Company employs a horizontal organizational structure, with each department managed by department heads reporting directly to the CEO. The Company is managed through various functional departments, namely; (i) Marketing, (ii) Finance, (iii) Legal, (iv) HR & IT, (v) Corporate Finance & Treasury, (vi) Purchase, and (vii) Internal Audit, (viii) Sales, (ix) Projects.


Management Team

The management team is led by the CEO - Mr. Afan Aziz. He holds a bachelor's degree from London School of Economics and has been with the Company since 2002. He brings strong business acumen to his role with over 2 decades of industrial experience. With two decades of industry experience, Mr. Shah has served as Group CFO since 2019, bringing financial leadership and strategic oversight to A.J. Textile Mills for the past six years. A seasoned professional with 23 years of experience, Mr. Kakar has been instrumental in overseeing operations at A.J. Textile Mills as COO since 2017, contributing significantly to the company’s operational efficiency and growth. They are assisted by a team of qualified professionals.


Effectiveness

The management meetings are held regularly with follow-up points to resolve operational issues, if any. This ensures smooth flow of operations.


MIS

AJ Textile has been using SAP Business One version 9.2 (9.20.160) PL: 06, since 2013. The following are the operating modules: Financials, Sale AR Module, Purchasing AP Module, Business Partners, Banking Module, Inventory Module, Production Module, Human Resource, and Project Management.


Control Environment

The Company maintains an in-house internal audit function which enhances risk management, control, and governance processes. The Company is accredited with multiple certifications for compliance and quality assurance, namely; Standard 100 by OEKO-TEX, Global Organic Textile Standards (GOTS), Organic Content Standard, and Sustainable (PRIMARK).


Business Risk
Industry Dynamics

The spinning sector witnessed a modest recovery in FY25 with yarn production (~2.67mln MT) growing by ~7.6% YoY, reversing consecutive declines. Despite this, profitability remains under pressure as margins stayed thin (gross: ~7.3%; net: ~-0.8%) owing to higher raw material costs, increased reliance on imported cotton (~35% of supply), and elevated finance expenses. Borrowings continued to rise, reflecting the sector’s inventory-heavy operations. Policy measures, including the removal of GST exemption for zero-rated exporters and reduction in import duties, are expected to support domestic producers. Going forward, sustained yarn demand, improved cotton availability, and easing financing costs will be critical for recovery. Overall, the sector’s outlook is stable.


Relative Position

The Company's maintains an adequate market share of (~1%) in terms of the spindles installed. The installed capacity stands at 113,264 spindles


Revenues

AJ. Textile generates revenue from both local (~92%) and export (~8%) sales. During 6MFY25, the topline of the Company witnessed an increase of ~2.5%, reported at ~PKR 8bln (6MFY24: PKR 7.8bln). The topline stood at ~PKR 11.5bln in 9MFY25. Improvement in revenue was attributed to an increase in demand coupled with price change. Looking ahead, management is optimistic about maintaining growth momentum. Due to high finance costs and the implementation of standard taxation on exporters, many textile units have ceased operations. In this context, AJ Textile is strategically exploring these opportunities to enhance its market share, by improving top-line performance.


Margins

During 6MFY25, the gross margin of the Company witnessed an increase and stands at ~12.2% (6MFY24: ~9.9%) due to proper management of procurement costs. The operating margin had a trickled-down effect and posted an incline (6MFY25: ~11.1%, 6MFY24: ~8.2%). Furthermore, the net profit margin remained stable and reported at ~3.9% (6MFY24: ~3.2%). Going forward, the recent reduction in the policy rate and the GST exemption is expected to positively impact the Company’s overall margins.


Sustainability

Looking ahead, the Company intends to strategically explore new opportunities to drive revenue growth. Additionally, it aims to reduce energy costs by increasing its reliance on solar energy, while effectively managing operational expenses. These efforts are expected to lead to improved financial performance.


Financial Risk
Working capital

As of 6MFY25, the Company's net working capital days improved to 91 days (6MFY24: 107 days). Working Capital days improved further by 9MFY25 declining to 88 days. The reduction in net working capital days is attributable to a decrease in inventory days, which improved to ~61 days as of 6MFY25 (6MFY24: ~71 days) due to maintaining optimum inventory turnover strategically. Moreover, the Company reduced its reliance on short-term borrowings to lower financial charges, a move primarily associated with improved inventory management. This reduction positively impacted the Company's inventory performance. Receivable days of the Company also improved to ~31 days as of 6MFY25 (6MFY24: ~36 days). Trade payable days of the Company stands at ~5 days as of 6MFY25 (6MFY24: ~6 days). The inventory days and the trade payable days remained stable by 9MFY25 standing at ~61 days and ~5 days, respectively. The Company maintains a sufficient buffer to support borrowing. Going forward the working capital cycle will remain unchanged.


Coverages

As of 9MFY25, the Company reported an FCFO of ~PKR 1,078mln (6MFY25: ~7744mln). The increase was attributed to higher profitability. Finance costs also decreased due to strategic changes to reduce short-term borrowing exposure. The interest coverage ratio (FCFO/Finance Cost) of the Company stood at 6.7x as of 9MFY25 (FY24: 5.0x) reflecting the Company's ample capacity to fulfill its short-term obligations. Going forward, management is focused on reducing its borrowing exposure, which is expected to positively impact the company’s coverage ratios.


Capitalization

As of 9MFY25, the Company significantly reduced its borrowing exposure to lower financial charges and a debt-to equity ratio of ~32% (FY24: ~38%). Total borrowings stand at ~PKR 3,359mln for 9MFY25 (FY24: ~PKR 4,133mln), while total equity improved to ~PKR 7,024mln (FY24: ~PKR 6,672mln). 
 
 

Sep-25

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A.J. Textile Mills Limited

financial summary

(PKR mln)

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Mar-25
9M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 7,814 7,857 8,088 7,671
2. Investments 122 292 121 227
3. Related Party Exposure 32 32 31 29
4. Current Assets 5,185 5,123 5,859 5,752
a. Inventories 2,574 2,623 3,260 3,319
b. Trade Receivables 977 1,289 1,502 1,518
5. Total Assets 13,153 13,304 14,099 13,679
6. Current Liabilities 1,570 1,563 1,082 937
a. Trade Payables 244 210 198 167
7. Borrowings 3,359 4,133 5,832 6,522
8. Related Party Exposure 0 0 0 0
9. Non-Current Liabilities 1,200 924 793 676
10. Net Assets 7,024 6,683 6,391 5,543
11. Shareholders' Equity 7,024 6,683 6,391 5,542
B. INCOME STATEMENT
1. Sales 11,581 15,475 12,165 11,206
a. Cost of Good Sold (10,357) (13,925) (10,819) (9,842)
2. Gross Profit 1,224 1,551 1,347 1,364
a. Operating Expenses (139) (187) (163) (242)
3. Operating Profit 1,085 1,364 1,183 1,122
a. Non Operating Income or (Expense) (22) 17 61 (98)
4. Profit or (Loss) before Interest and Tax 1,062 1,380 1,245 1,024
a. Total Finance Cost (172) (393) (512) (329)
b. Taxation (339) (130) (191) (181)
6. Net Income Or (Loss) 551 858 541 514
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 890 1,827 1,490 1,305
b. Net Cash from Operating Activities before Working Capital Changes 890 1,359 1,005 1,029
c. Changes in Working Capital 0 1,468 7 (1,725)
1. Net Cash provided by Operating Activities 890 2,827 1,012 (696)
2. Net Cash (Used in) or Available From Investing Activities 0 (499) (721) (1,811)
3. Net Cash (Used in) or Available From Financing Activities 0 (2,060) (330) 2,592
4. Net Cash generated or (Used) during the period 890 269 (39) 84
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -0.2% 27.2% 8.6% 42.3%
b. Gross Profit Margin 10.6% 10.0% 11.1% 12.2%
c. Net Profit Margin 4.8% 5.5% 4.5% 4.6%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 7.7% 21.3% 12.3% -3.7%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 10.7% 13.1% 9.1% 9.7%
2. Working Capital Management
a. Gross Working Capital (Average Days) 88 102 144 127
b. Net Working Capital (Average Days) 83 97 139 123
c. Current Ratio (Current Assets / Current Liabilities) 3.3 3.3 5.4 6.1
3. Coverages
a. EBITDA / Finance Cost 5.5 5.4 3.4 4.8
b. FCFO / Finance Cost+CMLTB+Excess STB 1.5 2.0 1.5 2.1
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 2.9 2.2 3.6 3.4
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 32.4% 38.2% 47.7% 54.1%
b. Interest or Markup Payable (Days) 44.1 47.2 90.7 111.0
c. Entity Average Borrowing Rate 5.6% 7.5% 8.5% 6.0%

Sep-25

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A.J. Textile Mills Limited

rating scale

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Sep-25

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A.J. Textile Mills Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
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Sep-25

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