TABLE OF CONTENT:

Introduction: ............................................................................................................................................................................ 1
Environmental, Social & Governance (ESG) Initiatives: ........................................................................................................... 2
Mission: .................................................................................................................................................................................... 2
Vision 2025: ............................................................................................................................................................................. 2
Business Segments: .................................................................................................................................................................. 2
HOSIERY ............................................................................................................................................................................... 2
DENIM .................................................................................................................................................................................. 3
APPAREL ............................................................................................................................................................................... 3
ACTIVE WEAR ....................................................................................................................................................................... 3
YARNS ................................................................................................................................................................................... 3
PRICES: ................................................................................................................................................................................. 4
Corporate Information:............................................................................................................................................................ 4
Key Shareholders (with stake 5% or more): ............................................................................................................................ 4
Key People: .............................................................................................................................................................................. 4
Offices: ..................................................................................................................................................................................... 4
Plant Location: ......................................................................................................................................................................... 5
Corporate Social Responsibility (CSR): ..................................................................................................................................... 5
Subsidiary: ................................................................................................................................................................................ 5
Listing on Pakistan Stock Exchange ......................................................................................................................................... 6
Equity Profile (AS OF 3RD DEC ,2023): ..................................................................................................................................... 6
The Employee Stock Option Scheme: ...................................................................................................................................... 7
PROFITABILITY RATIO: ........................................................................................................................................................ 18
LIQUIDITY RATIO ................................................................................................................................................................ 20
ACTIVITY RATIO .................................................................................................................................................................. 21
ASSETS EFFICIENCY RATIO ................................................................................................................................................. 22
SOLVENCY RATIO ............................................................................................................................................................... 23
SWOT Analysis ....................................................................................................................................................................... 28
Recommendation: ................................................................................................................................................................. 29
Conclusion:............................................................................................................................................................................. 30
References: ............................................................................................................................................................................ 30

ACKNOWLEDGEMENT
"I am very grateful to my instructor, Dr. Nayeem Ansari, who taught me the fundamentals of finance in my
first course. I consider myself fortunate to have had the opportunity to learn this course from him, and I am
especially thankful for the interactive sessions and his sharing of corporate experiences as a CFO.

In his classes, Sir Naeem not only explained the theory but also provided real-world examples, strengthening
our foundation in finance. He taught us how to conduct a detailed analysis of a company, emphasizing the
importance of reading between the lines in financial data. He showed us how a skilled analyst approaches their
work and shared insights into the daily responsibilities of a CFO, illustrating the role through examples from big
companies such as DG Khan Cement and Unilever.

Thanks to his teachings, I now understand how major companies manage their inventory, receivables, and
payables. Sir Naeem's lessons have empowered me to conduct financial analyses with confidence. I am grateful
for the knowledge and skills he imparted, which have made me capable of undertaking financial analysis of
Interloop."

PRESENTED BY SYED USARIM ALI SHAH

STUDENT ID 20221-31790

INTERLOOP LIMITED
The Hosiery Miracle of Pakistan
Introduction:
Interloop Limited is a textile based B2B manufacturing company based in Faisalabad, Pakistan. Interloop is a
vertically integrated multi-category Full Family Clothing Company, manufacturing Hosiery, Denim, Knitted
Apparel and Seamless Active wear products, for top international brands and retailers, besides producing Yarns
for a range of textile customers.

Interloop Limited (ILP) was incorporated on April 25, 1992, as a private limited company. Subsequently, it was
converted into public unlisted company in July 2008 and was listed on Pakistan Stock Exchange (PSX) in April
2019. Being the largest listed textile company on Pakistan Stock Exchange by market capitalization and among
the top exporters of Pakistan, with annual sales of PKR 119,200 million, Interloop employs 30,000+ highly
motivated and engaged people from over 15 nationalities. It enjoys an organizational network operating from
6 countries, with an extensive, well-equipped industrial infrastructure base in Pakistan, an associate
manufacturing facility in Sri Lanka, sourcing office and contract manufacturing facility in China, and marketing
services offices in USA, Europe and Japan.

Started off with 10 knitting machines in 1992, Interloop has now grown into one of the world’s largest hosiery
manufacturers and a vertically integrated company with state-of-the-art spinning, yarn dyeing, knitting and
finishing facilities. With over 5000 of the latest Italian knitting machines Interloop is the world’s largest socks
exporter and is said to have a 3.5-4% share of the global market, having an export of over 5000 containers a
year just for Hosiery.

Environmental, Social & Governance (ESG) Initiatives:

Interloop is globally recognized for its commitment to environmental, social responsibility, and governance
(ESG). It actively participates in the Race to Zero initiative, aiming to reduce carbon footprint and conserve
water. LEED certifications, renewable energy initiatives, and water-saving technologies showcase its dedication
to sustainable manufacturing. As per management, all plants are planned to be LEED certified in the future. The
company aims to cut greenhouse gas emissions by 25% till 2026, prioritizing renewable energy and cleaner
fuels by adding solar capacity and transitioning steam generation equipment from coal to biomass. The water
reduction efforts include upcoming water recycling facility at plant 5 location and the use of Nano-Bubble
technology in the wash process, which cuts water consumption by ~95%, chemical consumption by ~71%, and
the energy consumption by ~50%, with zero liquid discharge. These measures will help the company achieve
its water reduction target of 25% by 2026. ILP is also a member of ETI, a leading alliance of companies, trade
unions, and NGOs that promotes ethical trade practices.

Interloop has received numerous awards for corporate social responsibility, including WWF-Pakistan Green
Office Certification and the Prime Minister's Award for Industrial Excellence. As a member of ETI, it promotes
ethical trade practices. In 2023, Interloop received the Tom Tailor Supplier Excellence Award and the UN GCNP
Sustainability Award, emphasizing its commitment to sustainable development. Additional recognition includes
the A&G Performance Award and being named the Most Preferred Employer in the Textile Industry

Mission:
To be an agent of positive change for the stakeholders and community by pursuing an ethical and sustainable
business

Vision 2025:
To Become a Full Family Clothing Partner of Choice

Interloop's strategic focus is to maintain leadership in hosiery and expand into new categories, offering a full
range of family clothing. The aim is to achieve $700M in revenue by FY2026, emphasizing responsible
manufacturing with a 25% reduction in carbon footprint and resource consumption. As part of its 2025 Vision,
Interloop plans to invest in a fully vertical apparel facility to enhance supply chain transparency and increase
annual capacity to 40 million pieces of apparel.

Business Segments:
HOSIERY (Hosiery refers to such garments that can be worn on feet and legs i.e. socks, stockings, leggings and
tights)
796M Pairs of Socks Annual Production Capacity

Over the last 31 years, Interloop Limited has maintained its position as one of the largest suppliers of socks to
international brands and retailers globally, including Nike, adidas, STICHD, Target, H&M, C&A, Amazon, and
Uniqlo, to name a few. With 5 vertically integrated manufacturing facilities spread across Pakistan, Interloop
Hosiery is equipped with the latest Italian and Chinese Knitting Machines, Spanish Processing Machines, and
Italian Dyeing Machines, having quick changeover capability and highly skilled staff to produce high volumes
of multi-types and complex products.Interloop has the capacity to produce 796 million pairs of socks annually,
including athletic, performance, fashion, and casual wear for all genders and sizes, and it has one of the largest
capacities for infant socks.

DENIM
6M Garments Annual Production Capacity

Interloop's Denim Apparel manufacturing operations, initiated in December 2019, are among Southeast Asia's
most technologically advanced facilities. The LEED Platinum-certified plant, recognized as one of the world's
greenest buildings, has over 3,500 associates and targets a 1:1 male-to-female workforce ratio. With a current
capacity of 500,000 units monthly, Denim plans to expand to 1 million pieces by 2025, with existing
infrastructure in place.

The product line includes bottoms, shorts, skirts, jackets, and workwear cargos for all ages, genders, and sizes.
Interloop Denim provides services to brands and retailers such as Guess, Hugo Boss, Mustang, Diesel, Levi's
Kids (Haddad Brands), Target, NYDJ, and INDITEX, maintaining a balanced geographical mix. Diesel, Guess,
Hugo Boss, and Mustang are top revenue generating clients for this segment. Interloop Denim leads the way in
ecofriendly denim manufacturing, using laser and ozone technology to cut pollution by 90%, championing
water conservation, and Green Chemistry. Management plans to increase the current annual production
capacity of 6m pcs to 12m in the near future.

APPAREL
ACTIVE WEAR 22M Garments Annual Production Capacity

Interloop’s expansion into Knitted Apparel since 2019 has attracted numerous brands and retailers, from
various markets including North America, EU and UK. The Knitwear Apparel division produces a variety of
product mix including T-Shirts, Underwear, Polo shirts, Sweatshirts, Pants, Fleece Hoodies, and Jackets, which
are exported to renowned brands and retailers in USA, UK, and EU. Some of our customers include, adidas,
Target, JCPenney, Tom Tailor, Carhartt, LEE, Lyle & Scott, Ben Sherman, New Balance, and Juicy Couture. The
division currently produces 1.8m garment pieces (pcs) each month and has a daily dyeing and knitting capacity
of 10 tons and 15 tons, respectively

ACTIVE WEAR
4M Garments Annual Production Capacity

Interloop has established a state-of-the-art vertically integrated Seamless Activewear manufacturing facility at
the Interloop Industrial Park, Faisalabad in 2018. The business has an annual production capacity of 4 million
pieces in various styles, ranging from high-performance Activewear to basic Underwear, offering ten different
sizes to cater to a wide range of customers. Top-notch equipment, including Italian knitting, and dyeing
machines, and Japanese sewing machines ensure optimum quality with vast capability in fabrics, dyeing
techniques, and stitching operations.

Interloop Activewear is a proud partner of world-leading brands and retailers, including adidas, Reebok, Guess,
Zara, H&M, K-Mart, and Dillard.
YARNS
32M LBS Annual Production Capacity (Converted into 20/s)

SPINNING

Interloop produces 32 million Lbs (Converted into 20/s) of top-quality Yarn annually for a range of textile
customers, following strict testing standards, on automated spinning plants equipped with the latest European
and Japanese machines. More than 50% of the yarn is consumed in-house, while the remaining serves
renowned weavers, apparel, denim, knitters and towel manufacturers. With an annual dyeing capacity of 5.5
million kgs, Interloop offers a diverse range of colors in yarns, including Polyester, Nylon, Acrylic, Coolmax,
Modal, Tencel, Viscose, Wool, Bamboo, Blended, Microfibers, and Recycled Yarns.

Interloop also utilizes modern Italian Air Covering Machines with 1 million kgs annual production capacity for
various yarn types of in-house dyed, dope dyed, and raw white yarns with spandexes like Lycra and Creora at
customized ratios.

Yarn Dyeing

Highly automated dyeing operations with automatic dyestuff and chemical dispensing system. With dyeing
capacity of 4 million kg, they offer an extensive range of colours in Spun and Filament yarns.

PRICES:
In FY22, hosiery and denim prices were USD 6.01/dozen and USD 7.98/piece, respectively. Current prices are
USD 6.60/dozen and USD 10.00/piece. In FY23, initial prices were USD 6.3/dozen and USD 10.2/piece. Current
prices are USD 6.47/dozen and USD 10.16/piece.

Corporate Information:
ILP has instituted a well-designed organizational structure comprising segregated departments for key
functions. All divisions have independent management teams and organizational structure. Board of Directors
(BoD) comprises seven members, with two independent directors along with one female representation. For
effective oversight, five board level committees are also present namely; Audit Committee, HR & Remuneration
Committee, Nomination Committee, Risk Management Committee and Environmental, Social and Governance
Committee. An independent internal audit function is also present, which reports directly to Audit Committee.

Key Shareholders (with stake 5% or more):

Mr. Musadaq Zulqarnain ~32.88% Mr. Navid Fazil ~34.22% Mrs. Shereen Aftab ~6.36%

Key People:
CEO: Navid Fazil Board Chairman: Musadaq Zulqarnain Company Secretary: Rana Ali Raza CFO:
MUHAMMAD MAQSOOD

AUDITORS: KRESTON HYDER BHIMJI & CO. Chartered Accountants

Offices:
CORPORATE OFFICE INTERLOOP LIMITED 1 KM, Khurrianwala- Jaranwala Road,Faisalabad, Pakistan Phone: +92
41 4360400 Fax: +92 41 2428704

REGISTERED OFFICE INTERLOOP LIMITED Al-Sadiq Plaza, P-157, Railway Road, Faisalabad, Pakistan

Plant Location:
PLANT 1: 1 KM, Khurrianwala-Jaranwala Road, Khurrianwala, Faisalabad, Pakistan.

PLANT 2 & 4: 7 KM, Khurrianwala-Jaranwala Road, Khurrianwala, Faisalabad, Pakistan.

PLANT 3: 8 KM, Manga-Raiwind Road, Distt. Kasur, Lahore, Pakistan.

PLANT 5: 6 KM, By Pass Road, Khurrianwala, Faisalabad, Pakistan.

DENIM PLANT: 8 KM, Manga-Raiwind Road, Lahore, Pakistan.

Corporate Social Responsibility (CSR):

Interloop's CSR initiatives focus on education, healthcare, and empowering communities:

Let's Fight Alzheimer

Interloop actively raises Alzheimer's awareness through its Alzheimer Socks initiative. Introduced since 2015,
the 2020/2021 batch, created in collaboration between Interloop Limited and Interloop Europe, features two
different socks in a pair to symbolize the confusion experienced by Alzheimer/Dementia patients. The initiative
encourages discussions and awareness about Alzheimer's, with all funds from sock sales directed to
Alzheimercentrum Amsterdam for scientific research. Previous collaborations (2015-2019) generated
approximately €1.78 million, supporting diagnostics and treatment research for Alzheimer's disease.

Commitment to Learning and Wellbeing of Youth

Partnering with TCF, Interloop supports 5000 underprivileged children across 34 schools and collaborates with
Allah Walay Trust for free meals and expanded support in Faisalabad. Additionally, the company works with
Roshni Homes Trust to educate and support approximately 650 orphaned children in Gujranwala. youth.

Health

Teaming up with Lok Sanjh Foundation, Interloop enhances healthcare in Punjab's cotton-growing regions
through Mobile Health Services, clinics, and flood relief efforts, benefitting over 100,000 patients and 16,820
families.

Empowering Women Interloop Limited

In collaboration with Salman Sufi Foundation, the Women on Wheels program empowers women through
motorbike training, road safety, and anti-harassment workshops, aiming to empower 2000 women in total.
Subsidiary:
Top Circle Hosiery Mills Co (DEC 1,2023)

Interloop Limited has successfully acquired a 64% equity stake in Top Circle Hosiery Mills Co, a US-based
hosiery manufacturer with a Chinese subsidiary. The completion follows necessary approvals and aligns with
Interloop's strategy to enhance shareholder value, fortify its global market position, and ensure long-term
sustainability. Top Circle now functions which is one of the world’s largest hosiery manufacturers operates as a
subsidiary of Interloop, offering potential diversification of revenue streams and resilience against inflation

IL Apparel

In 2019, ILP established IL Apparel (a wholly owned subsidiary), which handled the knitwear business of the
company. However, IL Apparel has been amalgamated with and into Interloop with effect from January 31,
2021

IL Bangla Limited

In June 2021, Interloop Limited (IL) sold its 31.61% equity stake in IL Bangla Limited, a Bangladesh-based
manufacturing company for socks and hosiery. This decision followed challenges in making the Bangladesh
operations profitable despite tariff-free access to the EU market. Interloop initially entered the EU market in
2009 through a partnership with Eurosox Plus and established IL Bangla Ltd in 2010. However, due to
profitability issues, the company decided to exit Bangladesh. Pakistan's pursuit of GSP Plus status from the EU
faced obstacles related to human rights concerns, including the death penalty issue, impacting trade prospects.
Despite a previous moratorium, Pakistan resumed executions after the 2014 Peshawar school attack, leading
the EU to withdraw the GSP Plus offer.

Listing on Pakistan Stock Exchange

INITIAL PUBLIC OFFERING (IPO):

In March 2019, Interloop Limited raised over PKR 5 billion through Pakistan's largest private sector IPO, listing
12.5% of its shares on the Pakistan Stock Exchange. This positioned the company among the top 50 listed on
PSX by market capitalization. Air Link Communication Ltd. broke the record in 2021 with Pakistan's biggest
private sector IPO, raising PKR 6 billion. The two-day book building process was oversubscribed by 1.37 times,
closing at PKR 46.10 per share. The funds raised were aimed at expanding hosiery and venturing into the
apparel business. The IPO saw widespread participation from investment community ranging from major
commercial banks, insurance companies, local and foreign institutions, asset management companies, TREC
holders and high net worth individuals.

Equity Profile (AS OF 3RD DEC ,2023):

MARKET CAP (000'S) 100,904,174.21 (100.90 B) SHARES 1,401,446,864 FREE FLOAT 280,289,373 FREE
FLOAT 20.%
The Employee Stock Option Scheme:
(ESOS) was introduced by Interloop Limited to offer company shares to eligible executive employees, aligning
their interests with the company's long-term growth. The scheme, initiated in 2016 and updated in 2020, aims
to make employees stakeholders in the company. ESOS shares have the same standing as ordinary shares. The
scheme's core objective is to incentivize and provide a sense of ownership to management and employees,
fostering enhanced performance for the company's overall growth. The Compensation Committee
recommends eligible employees for options, detailing terms and conditions, subject to company-prescribed
requirements.

HORIZONTAL ANALYSIS ON STATEMENT OF PROFIT OR LOSS:

FY21
SALES:
Net Sales of the company grew by 53% in FY21 (FY21: Rs. 55.0b; FY20: Rs. 36.3b) led by a 48% increase in
volumes and the remaining being a function of higher average selling price led by rupee devaluation. Increase
in demand post ease in COVID-19 lockdown measures across the world contributed to increase in sales. The
merger of IL Apparel also contributed to the growth in topline.

In terms of segments FY20vs FY21: Hosiery 83%vs79% Spinning 12%vs9% (socks and yarn comprise more than
90% net sales of the company). Denim 3%vs7% (In December 2019, ILP established Denim Apparel
manufacturing plant with production capacity of 500,000 pieces per month/6m pieces per annum) Apparel
0%vs2% Other Segments 2% 3% Total 100%vs 100%. The company has a diversified product range; however.
Growth across all segments were noted during FY21 due to BMR in Denim plant and Hosiery Plant 5. The sales
mix of the company indicates that export sales have historically constituted ~ 90% of the total topline of the
company.

Geographic Sales Mix FY20vsFY21 Australia 0%vs0.002% Asia 12%vs8% Europe 46%vs33% North America
33%vs50% Pakistan 9%vs9%. Concentration is considered moderate as exports to the top 5 countries
constituted around 81% (FY20: 75%) of net sales in FY21.

Client wise concentration continues to remain on the higher side as the top 15 clients accounted for 80%
(FY20: 79%) of gross sales in FY21.

2020 at a glance

Being an export-oriented business, ILP badly suffered in 2020 due to restrictions on the movement of people
and goods on account of COVID-19. Lockdown imposed not only resulted in curtailed operations of the
company but also tamed demand from major export markets.

The sales revenue tumbled by 3 percent in 2020 yet there was no respite in the cost of sales owing to supply
bottlenecks.
This pushed the gross profit down by 34 percent year-on-year in 2020 with GP margin deteriorating to 21.7
percent in 2020.

COGS:
High raw material charges, upward revision is salaries and wages, soared knitting, processing and packing
charges as well as inflated fuel and power charges pushed the cost of sales up by 43%.

Scaling Up Production

Hosiery: Annual installed capacity of this segment is 60.7m Dozens (DZNs of Pairs). During FY21, utilization
level stood at 85% vs 70% in FY20. The utilization level in FY21 increased to meet the increasing demand post
relaxation in COVID-19 lockdown measures across the world.

Yarn: Capacity utilization for both yarn and yarn dyeing increased to 84% (FY20: 77%) and 83% (FY20: 70%)
during FY21. The increase was an outcome of recovery in global markets.

Denim: The Capacity utilization of this division was reported at 56% in FY21 as this unit was established in
December 2019.

OPERATING EXPENSE:
Distribution & selling costs Higher sales translated into higher selling commission and elevated freight
charges driving the distribution expense up by 32 percent in 2021.

Admin and other expense also went up by 27 percent and 82 percent respectively in 2021.

Other expense increased primarily due to the higher contribution to welfare funds incurred during FY21.

OTHER INCOME:
Reversal of impairment loss and exchange gain were the two main drivers behind 65 percent year-on-year rise
in other income in 2021. Other income also provided tremendous support to the bottom-line as it grew by 585
percent in 2020 due to robust profit on TDRs (Term Deposit Receipts) and TFCs (Term Finance Certificates).

FINANCE COST:
During FY21, finance charges increased to Rs. 1.15b (FY20: Rs. 1.14b) due to increase in the quantum of debt
employed. Downward revisions in discount rate played a role in keeping the finance cost almost intact despite
increased borrowings in 2021. Finance cost grew by 14 percent in 2020 due to high discount rate in the initial
quarters of FY20 as well as increased borrowings during 2020.

TAX:
The current year's tax expense increased significantly to 581,292 compared to 319,428 in the prior year. The
total tax expense increased by approximately 81.98% from 2020 to 2021. The increase was attributed to higher
taxable income, changes in tax regulations, and an increase in adjustments from the prior year.
PROFITABILITY:
Profitability has witnessed improvement in FY21 primarily due to an increase in topline, and economies of scale,
currency devaluation and operational efficiencies yielding higher margins.

Gross profit of the company were reported FY21: 25.9%; FY20: 21.7% on account of economies of scale,
currency devaluation and operational efficiencies.

Operating profit multiplied by an astounding 147 percent in 2021 with an OP margin of 14.6 percent. This
suggests strong operational performance and effective cost management.

Net profit posted a tremendous gain of 250% in 2021 to clock in at Rs. 6291.57 million with an NP margin of
11.4 percent. Net margin was reported significantly higher at 11.4% (FY20: 4.9%) in FY21. Net profit fell by 65
percent year-on-year in 2020 to clock in at Rs.1796.40 million with an NP margin of 5 percent. Despite
shrunken operating and other expense and high other income, operating profit couldn’t help but dropped by
49 percent year-on-year in 2020 with OP margin drastically falling to 9 percent.

Going forward, the management believes that the company’s gross and net margin will remain on the higher
side due to growing demand for textiles and realization of further economies of scale, post expansion.
However, increasing interest rates on higher projected debt levels will be a drag on the overall profitability
profile of the company.

EPS:
EPS also improved and rose up to Rs. 7.0 in 2021, reflecting enhanced profitability on a per-share basis. EPS
also contracted to Rs.2.06 in 2020.

FY22
SALES:
Net Sales 2022 appears to be the most successful year when it comes to topline growth which clocked in at 65
percent. sales reached the record high value of Rs90B in 2022 due to the sharp decline in the value of the local
currency. This could be because a weaker local currency makes products more competitively priced in
international markets, potentially leading to increased export sales. The sizeable year-on-year uptick of ~65%
(exceeding the projected growth) can be explained by ~30% rupee devaluation, ~29% uptick in volume, ~6%
higher prices in dollar terms, a jump in average selling price, volumetric growth in all the segments and
volumes from newly commissioned Hosiery Plant V in FY22.

Net sales have more than doubled over the last two fiscal years while a 6-Year CAGR stood at ~28% for the
period (FY17-22).

In terms of segments hosiery exports generate about three-quarter of revenues, and the remaining is shared
by spinning, denim, apparels and others. Local sales are mainly comprised of yarn and wastage.The majority of
revenue is generated from the sale of socks, followed by denim trousers, yarn, dyed yarn, garments, boxers,
and active wear.

Geographic sales are 53% to North America, 32% to Europe, 7% to Asia and 8% to domestic customers.
ILP is one of the leading manufacturers and exporter of textile products, ranked third amongst top ten
exporters in the country in FY22.

Client wise top 10 clients consistently generating more than two-thirds of total sales on a timeline; The
management informed that about 70% of the company’s overall sales come from top customers such as Nike,
Adidas, Boss, Reebok, Target and H&M.

COGS:
High raw material charges, upward revision is salaries and wages, soared knitting, processing and packing
charges as well as inflated fuel and power charges pushed the cost of sales up by 59%

Scaling Up Production

In FY22, production capacity increased to 66.3m dozen pairs with the addition of 1,200 machines and a new
plant (HP-5). Total project cost of Rs. 5.9b was financed through an IPO conducted in Mar’19. Average
procurement cost of cotton, yarn and denim fabric has risen by ~36%, ~26% and ~23%, respectively in the last
18 months.

During FY22, hosiery segment utilization rate is 84% whereas spinning, dyeing and denim utilization is
88/88/77%. The capacity utilization of hosiery, spinning, yarn dyeing and denim during FY22 stood at 84%,
88%, 88% and 77%, respectively

OPERATING EXPENSE:
Distribution & selling costs The company experienced high operating costs primarily because it incurred
substantial expenses related to sales commissions. This could be indicative of an aggressive sales strategy or
significant sales volume, where a sizable portion of revenue is allocated to compensating sales personnel.

Administrative and distribution expenses grew in line with inflation and topline growth

Other expense increased by 83 percent year-on-year in 2022 on the back of sea and air freight, export
development surcharge and upward revisions in salaries and wages. realized loss on derivative financial
instruments. Derivatives are financial contracts whose value depends on the price of an underlying asset.
financial instruments were settled during the year resulting in an actual loss.The increase in "other expenses" is
also attributed to higher provisioning for WWF (Workers Welfare Fund) and WPPF (Workers' Profit Participation
Fund).

OTHER INCOME:
In the year 2021, there have been an impairment loss (recognized a loss on an asset). However, in 2022, there
was no improvement or positive change in the value of that asset, leading to no reversal of the previous loss.
As a result, the company experienced a decrease in "other income" by 65 percent in 2022.

FINANCE COST:
Finance cost surged by a massive 117 percent in 2022 due to monetary tightening as well as high borrowings.
ILP has low leverage as evidenced by gearing ratio of 35% and current ratio of 1.3 as of Jun’30, 2 while financial
charges also rose due to higher debt levels and benchmark rates
TAX:
The taxation expense for the year 2022 is significantly higher than that of the previous year (2021). depicting an
increase of 83%. The increase was attributed to higher taxable income because of changes in tax regulations,
and an increase in adjustments from the prior year.

PROFITABILITY:
Gross profit Despite high inflation and supply chain bottlenecks due to import restrictions, gross profit surged
by 83 percent year-on-year in 2022 with a GP margin of 28.7 percent in 2022 versus 25.9% in FY21. suggests
effective cost management or increased revenue, reflecting a strong financial performance amid adverse
economic conditions.

Operating profit rose by 98 percent in 2022 with an OP margin of 17.5 percent – the highest among all the
years under consideration. Moreover, denim prices have depicted a jump which also contributed to
profitability.

Net profit mounted by 96 percent in 2022 to stand at Rs.12,359.50 million with an NP margin of 13.6 percent.
net margins also increased to 13.6% in FY22 vs 11.5% in FY21 Strong revenue growth and cost efficiencies led
to timeline improvement in profitability margins.

Profitability margins on both gross and net basis have noted a consistent upward trend over the last two fiscal
years, Interloop Limited has recorded its highest-ever profit of more than Rs. 12.3 billion in the current financial
year due to new opportunities, stable operations, and sustainable growth by circumventing the incidents of
risk, maximizing efficiency in production, and profit enhancement through various means.

EPS:
EPS clocked in Rs.13.76 in 2022. Improved earnings have led to a positive trend in cash flows

FY23
SALES:
Net Sales Interloop Limited, a leading textiles and garment exporter from Pakistan, beat all odds to register a
record profit at a time when most of the textile and garment industry in the country was struggling to survive.

The fiscal year 2023 encountered several challenges, primarily due to political and economic uncertainty,
floods, a growing current account deficit, currency depreciation, rising foreign debt, and dwindling reserves in
Pakistan. The State Bank intervened by rapidly increasing interest rates in order to control inflation and
introduced various restrictions on imports in an effort to arrest the depletion of foreign currency reserves,
which further constricted the economic activity.

Despite these significant challenges, the Company performed remarkably well during the fiscal year 2023 and
delivered exceptional results by achieving the highest ever sales revenue of PKR 119.2BILLION, compared to
PKR 90.8 BILLION during the corresponding year. reflecting a growth of 31.14% over the preceding year, thanks
to an increase in exports. The company benefited from currency depreciation, which made its products more
affordable in the international market.

Geographic sales The company's revenue distribution across regions indicates a significant share from the
USA at 47%, followed by Europe and the UK at 37%, and Asia at 16%. Local sales contribute 6.9% to the overall
sales, providing a comprehensive view of their global market presence. High demand from the US and the Euro
zone-based apparel and fashion industry will continue to drive the sales up.

That’s an ambitious growth target for the company, aiming for $550 million in FY2024 and projecting $700
million by FY2026 through a transition to a full family clothing business. It will be interesting to see how the
strategy unfolds.

The sales grew by a CAGR of 33.5% for 2019-23

COGS:
However, the cost of sales increased by 22.3 percent to Rs. 79.3 billion, slightly up from Rs64.83 billion in FY22,
slightly up from Rs64.83 billion in FY22, potentially due to rising cotton prices (Cotton prices surged to a 12-year
high Rs. 22,935/maund as of Sept'22 due to scarcity from recent floods affecting local production), along with the
depreciation of the Pakistani Rupee.

With respect The capacity utilization of hosiery, denim, apparel, and activewear during FY2023 stood at 75%,
71%, 29%, and 29% respectively.

Operating expenses:
Operating expenses In a climate where the cost of doing business has escalated significantly in recent years,
Interloop Limited’s operating expenses also witnessed an increase, totalling Rs12.92 billion, marking a 26% rise
in FY23. High operating expense highlights inflation as well as an increase in company’s operations during the
period due to robust demand from the export markets.

Distribution expenses rose by 16.8 percent to Rs. 3.95 billion, accounting for 3.3 percent of sales compared to
3.7 percent in FY22.

Administrative expenses also witnessed a sharp increase of 33.4 percent, reaching Rs. 6.24 billion, up from Rs.
4.68 billion in the previous year.

Other expenses grew by 38 percent which may be the result of higher exchange gain and higher WWF and
WPPF respectively in 9MFY23.

OTHER INCOME:
An increase of 177% in "Other Income" contributes by net gain resulting from favorable currency exchange
rates. It's a significant contributor to the overall Other Income, unrealized gains from the change in the fair
value of derivative financial instruments, profits earned from holding Term Finance Certificates, income
generated from selling scrap.

FINANCE COST:
 Finance cost increased by 122%, in comparison to last year, due to increase in average borrowing rates.
Furthermore, the company’s finance costs experienced a substantial jump, increasing by 121.7 percent to Rs.
5.5 billion from Rs. 2.49 billion.

The company’s finance costs soared by 2.22x YoY and stood at Rs5.53bn as compared to Rs2.49bn in FY23,
mainly due to higher interest rates.The company seems to have a higher weighted average interest rate on
long-term borrowing (>12%) compared to short-term borrowing (around 12%). Additionally, management’s
use of EFS to hedge finance costs suggests a strategic approach to manage financial risks.

TAX:
On the tax front, the company paid a higher tax worth Rs1.41bn against the Rs1.06bn paid in the
corresponding period of last year, depicting an increase of 33% YoY

PROFITABILITY:
Gross Profit Despite continuous upside trend in material costs and manufacturing overheads, the
Management's commitment to achieve Lean manufacturing excellence led the Company's gross profit to grow
significantly by 53%, amounting to PKR 39,872 million in fiscal year 2023, compared to PKR 26,066 million in
the corresponding year. Cost saving initiatives and better pricing management contributed to the notable
improvement in profitability.

Operating profit The consistent increase in profit from operations over the three periods indicates a positive
trend in the company's operational performance. A higher percentage increase suggests that the company's
operational efficiency and profitability improved significantly in each respective year. This growth in profit from
operations could be attributed to increased sales, cost management, or improved operational processes.
Overall, the positive trajectory in profit from operations suggests that the company's core business activities
have been performing well and generating increased earnings over the analyzed periods.

Net profit rose to an impressive Rs. 20.18 billion, indicating an increase of 63.28% from the preceding
year.Despite severe economic and political headwinds in the country.

EPS:
This translated into earnings per share of PKR 14.39 in fiscal year 2023, compared to PKR 8.82 per share in fiscal
year 2022.

Additionally, the company’s earnings per share (EPS) surged from Rs. 8.82 in the previous year to Rs. 14.39 in
FY23. ILP also announced a final cash dividend of Rs. 2 per share, in addition to the interim cash dividend of Rs.
3 per share (30 percent) already paid for the year ending June 30, 2023.

Horizontal Analysis on Statement of Financial Position:

FY21, FY 22, FY23

Non-Current Assets:
Property, Plant, and Equipment: Significant growth in property, plant, and equipment, indicating ongoing
investments in fixed assets, possibly for expansion or technological upgrades.

Intangible Asset: Substantial growth in intangible assets, reflecting increased investments in non-physical
assets like patents, trademarks, or technology.

Long-Term Investments: Interpretation: Complete divestment or write-off of long-term investments in the

recent year, suggesting a change in investment strategy.

Long-Term Loans: Fluctuations in long-term loans, possibly influenced by changes in financing needs or
strategic decisions.

Long-Term Deposits: Varied changes in long-term deposits, potentially influenced by interest rates or changes
in financial policies.

Current Assets:
Stores and Spares: Consistent growth in stores and spares, indicating a need for increased inventory for
production or operational requirements.

Stock in Trade: A decrease in stock in trade in the most recent year, possibly due to changes in demand or
inventory management.

Trade Debts: Growing trade debts, indicating an increase in credit sales or extending credit terms to
customers.

Loan and Advances: Substantial growth in loans and advances, suggesting higher financial support provided
to others.

Deposit, Prepayment, and Other Receivables: A significant decrease in the most recent year, indicating
changes in prepayment and receivable patterns.

Derivative Financial Instruments: Introduction to use of derivative instruments, possibly for risk
management.

Accrued Income: A significant decrease in accrued income in the most recent year, indicating changes in
recognition or timing of income.

Refunds Due from Government and Statutory Authorities: Changes in refunds due, possibly influenced by
regulatory or tax-related factors.

Short-Term Investments: Significant growth in short-term investments in the recent year, suggesting a shift in
investment strategy or temporary placement of excess funds.

Deferred Employee Share Option Compensation Expense: Stable deferred employee share option
compensation expense, with no significant changes observed.

Cash and Bank Balances: A substantial increase in cash and bank balances in the most recent year, potentially
indicating better liquidity or capital management.

Equity:
Issued, Subscribed, and Paid-up Capital: A substantial increase of 56% in 2023 indicates significant capital
injection, potentially through equity offerings or retained earnings.
Reserves: A decrease of 11% in 2023 may suggest utilization of reserves for various purposes, possibly
investments or distributions.

Unappropriated Profit: A significant rise of 53% in 2023 highlights improved profitability and earnings
retention.

Non-Current Liabilities:
Long-Term Financing: A moderate increase of 7% in 2023 suggests a measured approach to long-term debt
management.

Lease Liabilities: A notable decrease of -39% may signal changes in lease structures or payment terms.

Deferred Liabilities: A substantial increase of 58% indicates deferred obligations or potential long-term
commitments.

Current Liabilities:
Trade and Other Payables: A moderate increase of 32% in 2023 points to higher short-term obligations,
possibly due to increased business activities.

Unclaimed Dividend: A significant decrease of -25% may be attributed to changes in dividend policies or
improved communication with shareholders.

Accrued Mark-up: A substantial increase of 160% indicates higher interest accruals on financial instruments.

Short-Term Borrowings: A notable increase of 20% suggests an elevated reliance on short-term debt for
financing.

Derivative Financial Instruments: A significant decrease of -100% may indicate changes in risk management
strategies or exposure.

VERTICAL ANALYSIS ON STATEMENT OF PROFIT AND LOSS:

Cost of Sales:

The cost of sales as a percentage of net sales has improved from 74.16% in 2021 to 71.25% in 2022 and further
to 66.55% in 2023. This indicates an increasing gross profit margin, reflecting better control over production
costs.

Gross Profit:

The gross profit margin has consistently increased from 25.86% in 2021 to 28.68% in 2022 and then to 33.45%
in 2023. This upward trend suggests improved efficiency in generating profits from sales.

Operating Expenses:

Operating expenses as a percentage of net sales have slightly decreased from 11.27% in 2021 to 11.17% in
2022 and further to 10.71% in 2023. This indicates some control over operating costs.
Distribution Cost:

Distribution costs have increased both in absolute terms and as a percentage of net sales.

Administrative Expenses:

- Administrative expenses as a percentage of net sales have increased from 2.89% in 2022 to 4.30% in 2023,
suggesting potential inefficiencies in administrative cost management.

Other Operating Expenses:Other operating expenses have increased both in absolute terms and as a
percentage of net sales.

Profit from Operations:

Profit from operations has shown a consistent increase as a percentage of net sales, from 14.59% in 2021 to
17.51% in 2022 and further to 22.74% in 2023, reflecting improved operational efficiency.

Finance Cost:

Finance costs as a percentage of net sales have increased from 2.09% in 2021 to 2.74% in 2022 and further to
4.64% in 2023. Further examination is needed to understand the reasons behind this increase.

Profit Before Taxation:

Profit before taxation has consistently increased from 12.50% in 2021 to 14.77% in 2022 and further to 18.11%
in 2023, indicating improved overall profitability.

Taxation:

The tax rate as a percentage of net sales has slightly increased over the years but remains relatively low.

Profit for the Year:

The net profit margin has steadily increased from 11.45% in 2021 to 13.60% in 2022 and further to 16.92% in
2023, indicating enhanced overall profitability.

VERTICAL ANALYSIS ON STATEMENT OF FINANCIAL POSTION:

Noncurrent Assets
Property, Plant, and Equipment:

- The percentage of property, plant, and equipment relative to total assets has increased from 43% in 2021 to
47% in 2023. This suggests a higher proportion of investment in tangible assets.

Current Assets
Stock in Trade:

The proportion of stock in trade has decreased from 24% in 2022 to 16% in 2023, suggesting a potentially
more efficient inventory management.

Trade Debts:
Trade debts have slightly increased from 25% in 2021 to 27% in 2023, indicating a relatively stable accounts
receivable position.

Short-Term Borrowings:

Short-term borrowings as a percentage of total assets have increased from 32% in 2021 to 36% in 2022 and
further to 34% in 2023. This may imply an increased reliance on short-term financing.

Equity
Issued, Subscribed, and Paid-up Capital:

The percentage of issued, subscribed, and paid-up capital has increased from 9% in 2022 to 11% in 2023,
suggesting potential equity injections.

Reserves and Unappropriated Profit:

The proportions of reserves and unappropriated profit have increased over the years, indicating retained
earnings and potential financial strength.

Non-Current Liabilities
Long-Term Financing:

The percentage of long-term financing has slightly decreased from 15% in 2022 to 12% in 2023.

Deferred Liabilities:

Deferred liabilities have remained relatively stable, ranging from 6% to 7%, indicating consistent long-term
obligations.

Current Liabilities
Short-Term Borrowings:

While the percentage has fluctuated, short-term borrowings continue to be a significant component, ranging
from 32% to 36%.

Interpretation

The company has shown a consistent focus on non-current assets, particularly property, plant, and equipment,
indicating a commitment to long-term investments.

Current assets, such as stock in trade, trade debts, and short-term borrowings, show variations, suggesting
potential adjustments in inventory management and financing strategies.

Equity has increased as a percentage of total assets, reflecting positive retained earnings and potentially
increased investor confidence.

Long-term financing as a percentage of total assets has slightly decreased, while short-term borrowings have
shown fluctuations, indicating dynamic capital structure management.
The overall structure of the balance sheet has evolved, with an apparent emphasis on non-current assets and
equity. However, careful monitoring of short-term financing and liabilities is advisable for sustainable financial
health.

RATIO ANALYSIS:
FY 21, FY22, FY23
PROFITABILITY RATIO:
1) Gross Profit Ratio:

Examines the percentage of revenue retained after covering the cost of goods sold. A higher gross profit
margin indicates efficient production or service delivery.

The Gross Profit Ratio increased from 25.87% in 2021 to 28.65% in 2022 to 33.46% in 2023. The Gross Profit
Ratio has shown a consistent upward trend over the three years, indicating a significant improvement in
managing production or service costs relative to its net sales, resulting in a growing gross profit margin. These
strategies contribute to a more competitive position in the market, allowing for flexibility in pricing and
potential investments.

The higher ratio in 2023 means that for every rupee of net sales, the company retains approximately 33.46
paisa after covering the cost of goods sold, signaling financial health.

This upward trajectory in the GP ratio is likely to contribute to increased investor confidence in the company's
profitability.

The GP ratio is trending upward because of the increase in net sales every year. Factors that driving growth are
as follows

2021:

Higher average selling prices due to rupee devaluation.

Increased demand post-easing of COVID-19 lockdown measures.

Contribution from the merger of IL Apparel.

2022:

Sharp decline in the value of the local currency.

~30% rupee devaluation.

~29% increase in volume.

~6% higher prices in dollar terms.

Increased competitiveness in international markets.

Volumetric growth in all segments and contributions from the newly commissioned Hosiery Plant V.

2023:

The increase in export benefited from currency depreciation, which made its products more affordable in the
international market.
 2) Operating Profit Margin:

The Operating Profit Margin is a financial metric that measures the efficiency of a company's operations by
expressing the proportion of operating profit generated from its net sales or revenue. The Operating Profit
Margin indicates the percentage of each dollar of revenue that represents operating profit after covering the
cost of goods sold and operating expenses. A higher Operating Profit Margin signifies that a greater
percentage of revenue is contributing to operating profit, suggesting efficient cost management and
operational effectiveness.

The Operating Profit Margin has shown a consistent upward trend over the three years, increasing from 14.61%
in 2021 to 17.50% in 2022, and further to 22.76% in 2023.This indicates that in 2023 for every rupee of net
sales, the company retained approximately 22.76 paisa as operating profit. The margin reflects a moderate level
of profitability.

This substantial rise signifies a significant improvement in operating profitability, managing its operating
expenses relative to net sales potentially attributed to strategic initiatives, increased sales, and enhanced
operational efficiency. The rising Operating Profit Margin is a positive indicator of the company's financial
health and operational effectiveness, potentially contributing to overall business sustainability.

3) Pre-tax Margin (Financial Cost Ratio):

The Pre-tax Margin, also known as the Financial Cost Ratio, is a financial metric that measures the percentage
of pre-tax profit a company retains from its total revenue. The Pre-tax Margin represents the portion of each
rupee of revenue that contributes to pre-tax profit before accounting for taxes. A higher Pre-tax Margin
indicates operational efficiency and effective cost management, as more revenue is retained as pre-tax profit.

The Pre-tax Margin has shown a consistent upward trend over the three years, increasing from 12.51% in 2021
to 14.77% in 2022, and further to 18.13% in 2023 indicates the company's ability to enhance pre-tax
profitability.

The company retained 18.13 paisa as pre-tax profit for every rupee of net sales. This indicates a moderate level
of pre-tax profitability. The increasing margins suggest that the company has been successful in managing its
pre-tax expenses relative to net sales, showcasing operational efficiency. profits from its core operations.

4) Net Profit Margin (EAT):

Net Profit Margin (EAT), or Earnings After Tax Margin, is a financial metric that represents the percentage of a
company's net profit relative to its total revenue, revealing how much profit it retains from its revenue after
deducting all expenses, including taxes. A higher Net Profit Margin indicates better profitability, as a larger
proportion of revenue contributes to the company's bottom line.

There was a significant increase in Net Profit Margin from the previous year, reaching 16.93% in 2023, followed
by a moderate increase from 2021 to 13.58%, with a baseline Net Profit Margin at 11.45%.

Each year shows a progressive increase in Net Profit Margin, Indicates improved profitability, potentially due to
effective cost controls and strategic measures. and operational effectiveness.

The consecutive increases in Net Profit Margin are likely to enhance investor confidence, portraying the
company's consistent ability to generate higher profits from its operations.

5) Return on Equity (ROE):

Return on Equity (ROE) is a financial metric that measures the profitability of a company in relation to its
shareholders' equity. ROE indicates how effectively a company utilizes its equity to generate profits for its
shareholders. A higher ROE suggests efficient use of equity capital and better financial performance.
In 2021, the Return on Equity (ROE) stood at a baseline of 33.27%. There was a moderate increase from 2021 to
2022, reaching 49.02%. In 2023, there was a significant increase from the previous year, with ROE reaching
54.63%.

Indicates a substantial improvement in the company's ability to generate profits from shareholders' equity.
Suggests efficient use of equity capital and potentially strong financial performance.

The overall analysis suggests a positive trend in ROE, indicating the company's ability to deliver higher returns
to shareholders through effective capital utilization and improved financial performance over the three-year
period.

6) Return on Assets (ROA)

Return on Assets (ROA) is a financial metric that measures a company's profitability by evaluating its ability to
generate earnings from its total assets. ROA provides insights into how efficiently a company utilizes its assets
to generate profit. A higher ROA indicates better asset utilization and efficiency in generating earnings from its
operational activities.

In 2021, the Return on Assets (ROA) was 11.85%. In 2022, there was an increase to 15.75%, and further
improvement was observed in 2023, reaching 18.20%.

ROA has consistently increased over the three years, signifying a positive trend in asset efficiency and
operational effectiveness.

The rising ROA values suggest that the company is generating more profit from its total assets, contributing to
improved overall profitability.

Increasing ROA indicates a growing financial health, demonstrating the company's capacity to generate
earnings through effective asset management.

7) Earnings Per Share (EPS)

Earnings Per Share (EPS) is a financial metric that measures the portion of a company's profit allocated to each
outstanding share of common stock. EPS is a key indicator of a company's profitability on a per-share basis and
is widely used by investors to assess financial performance and earnings potential. A higher EPS generally
indicates higher profitability and potential returns for shareholders.

In 2021, the Earnings Per Share (EPS) was approximately 7.00. In 2022, it increased to approximately 8.82, and
in 2023, there was a substantial increase, reaching approximately 14.39.

EPS has consistently increased over the three years, signaling a positive trend in per-share earnings. The rising
EPS values suggest improved overall profitability, translating into higher earnings for shareholders. Increasing
EPS is favorable for shareholders, indicating potential returns on their investment.

The overall analysis suggests a positive trend in EPS, reflecting improved financial performance and higher
earnings potential for shareholders over the three-year period.

LIQUIDITY RATIO
1) Current Ratio

The Current Ratio is a financial metric that assesses a company's short-term liquidity and its ability to cover
immediate liabilities with its current assets. The current ratio provides insight into a company's short-term
financial health and its capacity to meet short-term obligations. A ratio above 1 indicates the company has
more current assets than liabilities, suggesting it is well positioned to cover its short-term obligations.
 The higher current ratio in 2022 indicates strengthened short-term liquidity and a more favorable position to
cover immediate liabilities. 2021, 2023 show moderate current ratios, suggesting a reasonable ability to cover
short-term obligations but with room for potential improvement. Although the current ratio in 2023 is
acceptable, evaluating ways to enhance short-term liquidity could be explored, Indicates the company has 1.14
times more current assets than current liabilities.

The overall analysis suggests fluctuations in short-term liquidity over the three years, with potential areas for
improvement in 2023 to strengthen the company's ability to cover immediate obligations.

2) QUICK RATIO

The Quick Ratio, also known as the Acid-Test Ratio, is a financial metric that assesses a company's immediate
liquidity and ability to cover short-term obligations using its most liquid assets. The quick ratio provides a more
stringent measure of a company's ability to meet short-term liabilities without relying on the sale of inventory.
A quick ratio above 1 indicates a favorable short-term liquidity position.

Consistent Level (2022 and 2021): The quick ratio has remained at 0.77 times in both 2022 and 2021, indicating
stability in the company's ability to cover short-term liabilities with quick assets.

The decrease in 2023 to 0.75 times suggests a marginal improvement in short-term liquidity, but there may be
room for enhancement. In 2023 the company has 0.75 times more quick assets than current liabilities.

Monitoring and potentially increasing quick assets could strengthen the company's ability to cover immediate
liabilities.

The overall analysis suggests a relatively stable but moderate level of short-term liquidity. There could be
considerations for enhancing quick assets to further strengthen the company's position in covering short-term
obligations.

ACTIVITY RATIO
1) Inventory Turnover (ITO)

Inventory Turnover (ITO) is a financial metric that measures how efficiently a company manages its inventory by
assessing the number of times inventory is sold and replaced over a specific period. A higher inventory
turnover ratio indicates more efficient inventory management, as the company is selling and restocking its
inventory more frequently.

2021 is the highest turnover among the three years, suggesting effective management.

The ITO decreased in 2023, suggesting a slightly lower frequency of inventory turnover compared to the
previous year. The days required to turn over inventory have increased from 2021 to 2023, indicating a
potentially longer sales cycle or a shift in inventory management strategy.

The overall analysis suggests efficient inventory turnover, with slight variations over the three years. The
company may explore strategies to optimize inventory turnover, considering industry benchmarks and market
demands.

2) Receivable Turnover (RTO)

Receivable Turnover (RTO) is a financial metric that measures how efficiently a company manages its accounts
receivable by evaluating the number of times receivables are collected and replaced over a specific period. A
higher receivable turnover ratio indicates more effective management of receivables, as the company is
collecting payments and replenishing receivables more frequently.
2021 Indicates the highest turnover among the three years, suggesting effective management of receivables.

All three years show relatively efficient turnover receivable, with the company collecting payments multiple
times annually.

There is a decrease in RTO from 2022 to 2023, indicating a slightly lower frequency of receivable turnover.

The days required to turn over receivables have increased from 2021 to 2023, suggesting a potentially longer
collection cycle or a shift in credit terms.

The company demonstrates effective receivable management, but optimization opportunities could be
explored to align with industry benchmarks and market dynamics.

3) Payable/Creditor Turnover

Payable/Creditor Turnover is a financial metric that measures how efficiently a company manages its accounts
payable by evaluating the number of times it pays its creditors over a specific period. A higher payable/creditor
turnover ratio indicates more effective management of payables, as the company is settling its obligations to
creditors more frequently.

2021 Indicates the highest turnover among the three years, suggesting effective management of trade
payables.

The payable turnover has decreased from 2022 to 2023, indicating a slightly lower frequency of settling trade
payables.

The days required to settle trade payables have increased from 2021 to 2023, suggesting a potentially longer
payment cycle or a shift in payment terms.

The overall analysis suggests efficient payable turnover, with variations over the three years. Exploring
opportunities to optimize payable management may further enhance cash flow and financial performance.

4) Operating Cycle

The Operating Cycle is a financial metric that measures the time it takes for a company to convert its
investments in inventory into cash through the sale of products and subsequent collection of accounts
receivable. The operating cycle reflects the efficiency of a company's working capital management and
provides insights into the overall efficiency of its operational cash flow. A shorter operating cycle generally
indicates more efficient working capital management.

The operating cycle has increased in 2023, indicating a potentially longer time to convert investments into cash
and collect receivables.

2021 shows the most efficient operating cycle, suggesting effective working capital management and quicker
conversion of assets into cash.

The overall analysis suggests variations in the operating cycle over the three years, with potential opportunities
for improvement in 2023 to enhance overall working capital efficiency and cash flow management.

ASSETS EFFICIENCY RATIO

1) Total Assets Turnover:

Total Assets Turnover is a financial ratio that measures a company's efficiency in utilizing its total assets to
generate revenue. A higher Total Assets Turnover ratio indicates that the company is effectively using its assets
to generate sales, reflecting efficient asset utilization. This ratio provides insights into the company's
operational efficiency and effectiveness in generating revenue from its overall asset base.

The ratio decreased in 2023 compared to 2022, suggesting a potentially less efficient use of assets to generate
revenue.

2021 reflects a higher turnover among the three, serving as a benchmark for assessing asset efficiency.

The overall analysis suggests variations in asset turnover, with potential considerations for improving efficiency
in asset utilization to generate revenue.

2) Total Fixed Assets Turnover:

The Fixed Asset Turnover Ratio is a financial metric that measures how efficiently a company utilizes its fixed
assets, such as property, plant, and equipment, to generate sales. The ratio indicates how well a company is
using its fixed assets to generate revenue. A higher Fixed Asset Turnover Ratio suggests more efficient
utilization of fixed assets, while a lower ratio may indicate underutilization or inefficient management of fixed
assets.

The increase from 2021 to 2022 suggests improved efficiency in utilizing assets to generate revenue. However,
the decrease in 2023 indicates a potential reduction in efficiency compared to the previous year.

The company experienced significant growth in average total fixed assets from 2021 to 2023.

SOLVENCY RATIO
1) Debt to Assets Ratio:

The Debt to Assets Ratio is a financial metric that assesses the proportion of a company's assets financed by
debt. The ratio provides insight into the extent to which a company relies on debt to fund its operations and
investments. A higher Debt to Assets Ratio indicates a higher level of debt financing in the capital structure,
posing potential financial risks, while a lower ratio suggests a greater reliance on equity financing.

In 2023 it Indicates that 18.7% of the company's assets are financed by debt. Suggests a relatively low
reliance on debt for asset financing, lower than that of 2022 20.3% and 2021 20%

The Debt to Assets Ratio remains relatively stable over the three years. The stable ratio indicates a consistent
and manageable level of debt in the company's capital structure.

The ratios below 25% suggest a conservative approach to debt financing, indicating a preference for equity or
alternative financing sources.

While the company has a conservative debt structure, it's essential to assess the industry and market conditions
to ensure a balance between risk and financing needs.

The overall analysis suggests a stable and conservative approach to debt financing, providing a foundation for
financial stability and prudent risk management.

2) Debt to Equity Ratio:

The Debt-to-Equity Ratio is a financial metric that measures the proportion of a company's financing that
comes from debt compared to equity. The ratio provides insights into the company's capital structure and
financial leverage. A higher Debt to Equity Ratio indicates a higher level of financial leverage and potential risk,
while a lower ratio suggests a more conservative and equity-oriented financing approach.
 The Debt-to-Equity Ratio fluctuates over the three years, indicating variations in the company's leverage levels.
The ratio decreased in 2023, suggesting a lower reliance on debt financing compared to 2022. indicating a
relatively more balanced capital structure.

The overall analysis suggests varied levels of financial leverage over the three years, with a trend towards a
slightly more conservative capital structure in 2023. It's essential to consider risk tolerance, industry norms, and
market conditions when evaluating the Debt-to-Equity Ratio.

3) Financial Leverage Ratio:

The Financial Leverage Ratio measures the extent to which a company uses debt in its capital structure to
support its assets. This ratio provides insights into the level of financial risk and leverage employed by the
company. A higher Financial Leverage Ratio suggests a greater reliance on debt for asset financing, increasing
the potential for higher returns but also higher financial risk. On the other hand, a lower ratio indicates a more
conservative approach with less reliance on debt.

The Financial Leverage Ratio fluctuates over the three years, indicating variations in the company's overall
financial leverage. The ratio decreased in 2023, suggesting a lower average reliance on debt financing
compared to 2022. 2023 serves as a benchmark with a lower ratio, indicating a relatively more balanced capital
structure.

The overall analysis suggests varied levels of financial leverage over the three years, with a trend towards a
slightly more conservative capital structure in 2023. It's essential to consider risk tolerance, industry norms, and
market conditions when evaluating the Financial Leverage Ratio

4) Interest Coverage Ratio:

The Interest Coverage Ratio is a financial metric that assesses a company's ability to meet its interest
obligations on outstanding debt. The ratio provides insight into the company's capacity to cover its interest
payments with its operating earnings. A higher Interest Coverage Ratio indicates a healthier ability to meet
interest obligations, while a lower ratio may signal potential financial distress and an increased risk of default
on interest payments.

The Interest Coverage Ratio decreased in 2023, indicating a lower level of coverage compared to the previous
two years. 2023 serves as a benchmark with a lower ratio, signaling a potentially lower capacity to cover
interest payments.

The overall analysis suggests variations in the Interest Coverage Ratio over the three years, with a decrease in
2023. It's important to continue monitoring financial performance and managing debt levels to ensure a
sustainable level of interest coverage.

PEST ANALYSIS
ECONOMIC:
Pakistan's textile sector, ranking fourth globally in cotton production, contributes 8.5% to the country's GDP
and 60% to export revenues, 40% of the employment in the manufacturing labour force.

Pakistan's overall textile exports reached USD 10 billion in 8MFY21, marking a 7% growth compared to the
same period in the previous year. Following export contraction in FY20 due to the pandemic, FY21 saw a 14%
growth, supported by the diversion of orders from regional competitors like India and Bangladesh, benefiting
local textile manufacturers.

In FY 2022-2023, textile exports declined by 10% to $16.63 billion, compared to $18.44 billion in the
corresponding period. Drop occurred due to factors like import restrictions, and subdued demand from the
USA and Europe, limited local cotton availability after flash floods, cotton prices surged to a 12-year high (~Rs.
22,935/maund as of Sept'22). Floods damaged ~45% of the cotton crop, valued at over $2.5 billion. The
government facilitates raw material imports to address shortages, but higher prices are impacting profit
margins and increasing working capital requirements, negatively affecting liquidity profilesof of textile
operators.

In fiscal year 2023, the global economy faced challenges due to supply chain disruptions, the Russia-Ukraine
conflict, and consumer demand pressures. The SBP consequently continued with tightening of monetary policy
and raising the Policy Rate to 22.0%. further burdened the economic activity Pakistan's GDP grew by 0.29%, but
foreign reserves contracted by USD 5.4 billion, leading to a 39.6% depreciation of the Pakistani Rupee. The CPI
inflation rate reached 29.2%, prompting the government to impose import restrictions and reduce the trade
deficit by 38.3%. Imports decreased by 27.3%, exports by 14.1%, and workers' remittances by 13.6% year-on-
year.

Pakistan maintains its position among the top 10 textile exporters globally, however, its market share has
contracted to 2.6%, down from 3.0% over the past decade, owing to non-competitive industry policies, lack of
innovation, and an unstable macroeconomic environment. The business landscape remains uncertain, with
ongoing energy price increases by the government to meet IMF benchmarks, impacting the cost of doing
business in the country.

POLITICAL
Political instability in Pakistan poses severe challenges to economic progress, leading to suboptimal policies,
frequent U-turns, and project delays. Mounting debt and reliance on foreign loans contribute to a weak
economy. Recent instability, marked by government actions such as impounding containers and banning textile
imports, has immediate adverse effects, causing losses for exporters, bearish investor sentiment and risking
millions of livelihoods. The removal of PM Imran Khan and concerns about terrorism and domestic stability
have further impacted business confidence. The textile industry, a significant economic driver, faces closures,
job losses, and an economic downturn, with an estimated 700,000 job losses and 25 to 30% of textile factories
shutting down. Urgent and decisive government intervention post-elections is crucial to prevent further
collapse of this critical sector and address the economic challenges facing the people of Pakistan.

SOCIAL:
As stated in the company's prospectus, Interloop recognizes the imperative of expanding into diverse
segments due to shifting fashion trends. lifestyle changes have increased the demand for casual and active
lifestyle which increased the demand for interloop’s products. The evolving preferences in fashion, coupled
with increasing disposable income and changing lifestyles, particularly the rising prominence of online
shopping, collectively signal an expected surge in demand

The decision to expand reflects a proactive strategy aimed at aligning product offerings with contemporary
style preferences. Interloop places particular emphasis on acknowledging changing lifestyles, notably the
increasing demand for casual and active living. This trend has significantly elevated the demand for Interloop's
products.
Moreover, the integration of e-commerce into consumers' purchasing habits is a pivotal consideration.
Interloop's expansion, particularly into hosiery, strategically positions the company to cater to this evolving
business landscape. By recognizing the impact of online shopping and the broader shift in consumer behavior,
Interloop is poised to tap into new market opportunities, ensuring it’s adaptability to the dynamic demands of
the modern fashion industry.

TECHONOLOGY:
Despite challenges in Pakistan's textile sector, companies embracing innovation, like Interloop Denim,
showcase consistent annual profits.

Laser and Ozone machines have replaced manual processes to minimize the impact on workers and ensure
precision and quality. Their LEED Platinum Apparel plant incorporates advanced technology in knitting, dyeing,
finishing, cutting, printing, and sewing.

ILP utilizes tailored ERP software and Oracle E-Business Suite Release 12 to oversee its activities. The company
operates these applications from its production data center while disaster recovery data center is also in
place.To ensure data is preserved, an automated process is executed at scheduled intervals every day.

Interloop embraces digital transformation in the Apparel industry with 3D Virtual Sampling and prototyping for
sock design. This co-creation process allows designers to explore concepts and variations digitally before
physical production. Using Techpack/CAD, designers have limitless choices for colors, yarns, and constructions,
enhancing creativity. The software offers a 3D view of designs on mannequins or sock dummies with adjustable
parameters, facilitating customer evaluation and feedback. This innovative approach streamlines the design
process, enabling validation and refinement before entering physical prototyping and manufacturing.

Interloop effectively tackled COVID-19 disruptions with Inspectorio Sight, implementing self-inspections
during mobility restrictions when other brands and retailers unable to perform any inspections at all, the
platform, in use since October 2018, streamlined quality measures, reducing errors with checklists and analytics.
Machine learning analyzed historical data, and pre-production questionnaires enhanced department
preparation, ensuring transparency and efficiency for both Interloop and its customers.

COMPETITIVE ANALYSIS OF RATIOS FOR 2023

I have done financial ratio comparison of Interloop Limited Pakistan with GulAhmed Textile Mills Limited. The
ratio is based on the Un-Consolidated Financial Statements of GulAhmed because Interloop has no subsidiary
company till Fiscal year ended June ,2023

Overall Analysis of Interloop Limited and Gul Ahmed Company Limited (2023):

1. Profitability Analysis:

Interloop:

Demonstrates robust profitability across various metrics.

High Gross Profit Ratio (33.46%) and Net Profit Margin (16.93%) indicate effective cost management.

Exceptionally high Return on Equity (ROE) at 54.63%, reflecting strong returns for shareholders.
Gul Ahmed:

Shows lower profitability compared to Interloop.

Gross Profit Ratio (14.90%) and Net Profit Margin (3.56%) are comparatively lower.

ROE (10.47%) is significantly below Interloop's, indicating a less efficient use of equity.

2. Liquidity Analysis:

Interloop:

Current Ratio at 1.14 indicates a healthy short-term liquidity position.

Quick Ratio (0.75) suggests reasonable ability to meet short-term obligations without relying heavily on
inventory.

Gul Ahmed:

Similar Current Ratio (1.11), but Quick Ratio (0.47) is lower than Interloop's, indicating potential reliance on
inventory to meet short-term obligations.

3. Asset Efficiency Analysis:

Interloop:

High Inventory Turnover (3.02) and Receivable Turnover (3.80) indicate effective management of working
capital.

Operating Cycle of 156.20 days suggests a comprehensive approach to managing the cash conversion cycle.

Gul Ahmed:

Inventory Turnover (2.61) and Receivable Turnover (4.57) are competitive.

Operating Cycle of 100 days is shorter, potentially reflecting a more efficient cash conversion cycle.

4. Solvency Analysis:

Interloop:

Debt to Assets Ratio (18.7%) and Debt to Equity Ratio (53.4%) are moderate, suggesting a balanced capital
structure.

Financial Leverage Ratio (2.86) indicates a moderate level of financial leverage.

Gul Ahmed:

Debt to Assets Ratio (16.86%) and Debt to Equity Ratio (51.99%) are slightly lower, indicating a less leveraged
structure.

Financial Leverage Ratio (1.33) is lower than Interloop's, reflecting a less aggressive use of debt.

Conclusion:
Interloop:

Strong overall financial health, with robust profitability and reasonable liquidity and solvency.
Efficient management of assets and working capital.

Gul Ahmed:

While profitability is lower than Interloop, Gul Ahmed shows a competitive position in liquidity and solvency.

Shorter operating cycle suggests efficient cash management.

SWOT Analysis

Strengths
Profitability Ratios: Interloop has demonstrated a consistent improvement in profitability ratios, including
Gross Profit Ratio, Operating Profit Margin, and Net Profit Margin, over the three-year period. This indicates
efficient cost management and operational effectiveness, contributing to the company's financial health.

Global Presence: Interloop's organizational network operates in 6 countries, with manufacturing facilities in
Pakistan, Sri Lanka, and China. This global presence, along with marketing services offices in the USA, Europe,
and Japan, enhances its market reach and potential for diversification.

Acquisition of Top Circle Hosiery Mills Co: The successful acquisition of a 64% equity stake in Top Circle
Hosiery Mills Co strengthens Interloop's global market position, providing potential diversification of revenue
streams and resilience against inflation.

State-of-the-Art Technology: Interloop embraces advanced technology in its operations, including laser and
ozone machines, 3D virtual sampling, and digital transformation in the apparel industry. This focus on
technology enhances operational efficiency, quality, and innovation.

Financial Stability: The company maintains a stable and conservative approach to debt financing, as reflected
in the Debt to Assets Ratio and Debt to Equity Ratio. This contributes to financial stability and prudent risk
management.

Weaknesses:
Dependency on Textile Sector: Interloop's significant presence in the textile sector exposes it to challenges
within the industry, such as fluctuations in cotton prices, global demand, and macroeconomic conditions. The
decline in textile exports in FY 2022-2023 indicates vulnerability to external factors.

Dependency on International Markets: Interloop's significant reliance on export sales to foreign countries,
such as the USA and Europe, exposes the company to external factors like global economic conditions, trade
policies, and geopolitical events. Changes in these factors can impact on demand for Interloop's products in
international markets.

Short-Term Liquidity Fluctuations: While the current ratio in 2022 indicates strengthened short-term
liquidity, fluctuations in liquidity ratios in 2021 and 2023 suggest potential areas for improvement in managing
short-term obligations.
 Potential Impact of Political Instability: Ongoing political instability in Pakistan, including frequent policy
changes and project delays, may impact Interloop's operations and business confidence. The textile industry, in
particular, is sensitive to political developments.

Opportunities:
Diversification and Global Expansion: The acquisition of Top Circle Hosiery Mills Co provides an opportunity
for Interloop to diversify its revenue streams and expand its global footprint. Leveraging the strengths of the
acquired company can contribute to sustained growth.

Evolving Consumer Trends: Interloop's recognition of changing consumer lifestyles and preferences,
particularly the demand for casual and active lifestyle products, presents an opportunity for the company to
align its product offerings with market trends.

Technological Innovation: Continued investment in technology and innovation, as demonstrated by the use
of 3D virtual sampling and advanced manufacturing processes, positions Interloop to stay competitive in the
dynamic fashion industry.

Strategic Cost Management: The success of strategic initiatives, such as effective cost management and
operational efficiency, presents an opportunity for Interloop to continue enhancing its profitability and
maintaining a competitive position in the market.

Threats:
Economic Challenges in Pakistan: Ongoing economic challenges in Pakistan, including inflation, currency
depreciation, and geopolitical tensions, pose threats to Interloop's financial performance and operational
stability.

Industry-Specific Challenges: Challenges within the textile industry, such as import restrictions, fluctuations in
cotton prices, and limited local availability, may affect Interloop's production costs and overall competitiveness.

Recommendation:
Diversification and Risk Management: Given the company's heavy reliance on the top 15 clients and
geographic concentration, it's advisable for Interloop Limited to focus on diversifying its client base and
expanding into new markets. This would help mitigate risks associated with client concentration and regional
economic challenges.

Cost Management: The company should continue its efforts in effective cost management, especially in the
face of rising raw material costs and operating expenses. Regular reviews of cost structures and identifying
areas for optimization can contribute to sustained profitability.

Strategic Expansion: Considering the success of recent capacity expansions and new plant setups, the
company should carefully evaluate further expansion opportunities. Strategic expansions can contribute to
increased production capacity, market presence, and overall competitiveness.
Financial Risk Management: Given the increase in finance costs, the company should actively manage its
financial risks, including interest rate fluctuations. Evaluating the debt structure, exploring options for
refinancing at favorable rates, and hedging against interest rate risks can be crucial.

Conclusion:
Interloop Limited has demonstrated resilience and adaptability in overcoming challenges, especially during the
COVID-19 pandemic and economic uncertainties. The continuous growth in sales, profitability, and expansion
projects signifies the company's strong market position.

The management's commitment to lean manufacturing, cost efficiency, and strategic initiatives has led to
remarkable improvements in financial performance. The consecutive growth in gross profit, operating profit,
and net profit over the years reflects the company's effective operational strategies.

However, it's essential for Interloop Limited to remain vigilant to external factors such as geopolitical and
economic uncertainties. The company's proactive approach to addressing challenges, along with a focus on
diversification, cost management, and strategic expansion, will contribute to sustaining its growth trajectory.

In conclusion, Interloop Limited has demonstrated resilience and effective financial management over the years
and is well-positioned to navigate challenges, capitalize on opportunities, and maintain its positive trajectory in
the market.

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