Press Release

VIS Reaffirms Entity Ratings of Al-Karam Textile Mills (Private) Limited

Karachi, April 15, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Al-Karam Textile Mills (Private) Limited at ‘A/A2’ (Single A/A Two). Medium to long-term rating of ‘A’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating remains ‘Stable’. Previous rating action was announced on April 04, 2024.

AKTM, part of the Al-Karam Group, has been operating a vertically integrated manufacturing facility for nearly four decades. Its product portfolio includes a variety of yarns, ranging from coarse to fine counts, as well as fabrics, home and institutional textiles and garments. AKTM has a global presence, with operations in the US, UK and Portugal. The Company also has a retail arm, Alkaram Studio, which was founded in 2010 and now operates 61 retail outlets nationwide.

Pakistan’s textile sector faces significant challenges, driven by economic cyclicality, intense competition and structural issues. The sector is highly sensitive to demand fluctuations, making it vulnerable to broader economic conditions. In FY24, cotton production rose by 79%, but a sharp 59.4% decline was recorded by October 2024. While a rebound to 5.55 million bales is expected in FY25, challenges like limited cotton acreage, rising energy costs and adverse weather conditions persist. Despite these issues, 1QFY25 textile exports grew, driven by reliance on imported cotton and value-added products. However, profitability remains vulnerable to cotton & yarn price fluctuations, inflation and exchange rate volatility. Additional pressures include a 23% gas price hike for captive power plants in March 2025 and the shift to the Normal Tax Regime (NTR), both of which will increase costs and strain manufacturers’ financial performance.

The assigned ratings reflect the Company’s topline growth, driven by both export and local sales. While gross margins remained stable, higher inflation led to increased operating costs, which, combined with higher borrowing and elevated interest rates, resulted in a decline in net margins. The deterioration in profitability also contributed to a decrease in cash flow coverages and liquidity indicators while remaining adequate., however, the capitalization indicators remained elevated during the review period. Going forward, achievement of projections including improvement in profitability and decrease in capitalization indicators would remain crucial from the ratings perspective.

For further information on this ratings announcement, please contact 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .