PACRA Maintains the Entity Rating of Saif Textile Mills Limited

The rating of Saif Textile Mills Limited (“STML” or “the Company”) is underpinned by the profile of its sponsoring group, the Saif Group, a prominent industrial and services conglomerate in Pakistan. The group has a notable presence across diverse industry segments, including power, textiles, oil and gas exploration, real estate, information technology and communication, and healthcare. STML comprises three spinning units and a dying unit, each equipped with state-of-the-art machinery from Europe, Japan, and China. The Company manufactures and sells different types of yarn, including Accru yarn, Mélange yarn, Dyed yarn, and Surgical cotton. Accru yarn is the Company’s leading product, contributing approximately 90% of total sales, while the remaining 10% is generated from the other yarn types. The management of the Company is expected to drive future growth through export prioritization and improved overall capacity utilization. During 9MFY25, STML's topline declined to PKR 8.69bln (FY24: PKR 12.25bln; 9MFY24: PKR 9.56bln), primarily due to a slump in domestic yarn demand. This was driven by increased yarn imports under the EFS scheme, which constrained market liquidity for local spinners, alongside a downward trend in international cotton prices that led to lower yarn prices. Additionally, a rise in gas prices further strained margins, resulting in a reduction of gross margins to 11.2% (FY24: 14.6%). The Company recorded a net loss of PKR 367mln during 9MFY25; however, a gradual reduction in the policy rate, along with the management's strategic intent to diversify the product mix by shifting towards finer yarn counts (100s and above), is expected to cater to high-value niche segments and enhance profitability. Following the recent reduction in electricity prices, the Company has shifted a major portion of its energy consumption to electricity. To mitigate the impact of rising energy costs, STML is undertaking two key initiatives: (i) the installation of a solar power plant, and (ii) the installation of a boiler for in-house steam generation. As part of its commitment to sustainable and renewable energy solutions, the Company is currently in negotiations with lender banks for the financing of a 10MW solar power plant, with an estimated project cost of PKR 900mln. Further, the sponsor's support, totaling PKR 2.5bln in the form of long-term loans and short-term working lines, remains critical to the sustainability of the Company's financial risk profile. The Company continues to operate with a highly leveraged capital structure and constrained working capital. Strengthening its credit quality metrics is necessary to enable the Company to independently support its core operations and reduce dependence on sponsor funding.
The ratings are dependent upon the continuity of financial support from sponsors. While generating sufficient cash flows to support Company operations on a standalone basis, and maintaining the profitability matrix at an optimal level. The adherence to the debt matrix at an optimal level is a prerequisite for the assigned ratings.

About the Entity
Saif Textile Mills Limited (STML) was incorporated in 1989. The Company is majority-owned by Saif Holdings, which holds a 49.58% stake. Other significant shareholders include NIT (5.80%), the State Life Insurance Corporation of Pakistan (3.90%), while the remaining 40.72% constitutes the free float. The Board of Directors comprises eight members, including the Chairman, Mr. Javed Saifullah Khan. Mr. Rashid Ibrahim resigned from his position as an Independent Director effective May 19, 2025. Mr. Rana Muhammad Shafi replaced Mr. Sohail Hussain Hydari as a director on May 23, 2025. Furthermore, Mr. Sohail Hussain Hydari has tendered his resignation as CEO. Mr. Assad Saifullah Khan has assumed the role of CEO of Saif Textile Mills Limited, effective from May 15, 2025. Mr. Assad Saifullah Khan also serves as the CEO of Kohat Textile Mills Limited. Additionally, in January 2025, Mr. Muhammad Waseem Aslam replaced Mr. Luqman as CFO. Mr. Abid Hussain has joined as Executive Director, Finance & Operations, bringing diversified experience in the textile sector. The new management has sufficient experience and has shown historic progress/growth in other associated Company in the textile sector.