Dewan Farooque Spinning Mills Limited (PSX: DFSM) was incorporated in Pakistan as a public limited company in 2003. The company is engaged in the manufacturing and sale of fine quality yarn. The company also manufactures yarn on contract basis. Pattern of shareholding As of June 30, 2025, the company has a total outstanding share volume of 97. 751 million shares which are held by 2177 shareholders. Local general public has the majority stake of 60. 34 percent in the company followed by Deewan Motors (Pvt.) Limited, an associated company of DFSM, holding 38. 62 percent shares. The remaining shares are held by other categories of shareholders. Performance Trail (2019-24) DFSM’s topline posted year-on-year growth only in 2021 and 2022. The company isn’t able to post even gross profit, let alone a positive bottomline in any of the year under consideration. The magnitude of net loss which had been lowering until 2021 bounced back for the next three years followed by a downtick recorded in 2025. 2015 was the last year when the company posted a positive bottomline. The detailed performance review of the period under consideration is given below. In 2019, DFSM’s topline posted year-on-year drop of 37. 22 percent to clock in at Rs. 482. 92 million. This was on account of a dip in yarn manufacturing on contract basis while revenue from spinning and raw material sale increased during the year. The company was facing working capital constraints as unabated losses since 2016 had not only resulted in hefty accumulated loss for the company but also created liquidity constraints where it was unable to repay its liabilities (see the graph of liquidity position). Cost of sales posted a decline of 41. 65 percent in 2019 owing to lesser raw materials consumed during the year. Consequently, the gross loss shrank by 55. 43 percent year-on-year in 2019 to clock in at Rs. 110. 12 million. Selling and distribution expense posted 17. 81 percent dive in 2019 particularly on the back of no commission incurred on sales coupled with lesser salaries paid during the year. Administrative expense declined by 47. 73 percent in 2019 on the back of lesser provisions for doubtful debt and advances booked in 2019. Operating loss tapered off by 52. 35 percent year-on-year to clock in at Rs. 159. 20 million. Finance cost increased by 9. 64 percent year-on-year on the back of higher discount rate during the year. DFSM posted net loss of Rs. 210. 21 million, down 44. 26 percent year-on-year. Loss per share stood at Rs. 2. 15 in 2019 versus loss per share of Rs. Rs. 3. 86 posted in the previous year. In 2020, the company suffered 10. 55 percent year-on-year drop in its net sales which clocked in at Rs. 431. 98 million. This was because the industries and markets had to undergo lockdown owing to the outspread of COVID-19. Owing to working capital constraints, the company continued yarn production on contract basis in order to stay operational. Gross loss shrank by 9. 90 percent year-on-year in 2020 to clock in at Rs. 99. 21 million. Operating expense narrowed down particularly as DFSM booked no provision for doubtful debt and advances during the year. Consequently, operating loss further contracted by 17. 97 percent year-on-year to clock in at Rs. 130. 58 million. Finance cost expanded by 20. 41 percent year-on-year in 2020 due to higher discount rate in the initial quarters of FY20. Net loss of the company tapered off to Rs. 197. 87 million in 2020, 5. 87 percent lesser than last year. Loss per share clocked in at Rs. 2. 02 in 2020. After constant drop in sales since 2018, DFSM posted 39. 46 percent year-on-year rebound in net sales which clocked in at Rs. 602. 43 million in 2021. The growth in revenue came from spinning charges while there were no raw material sales during the year. Cost of sales grew by 18 percent year-on-year in 2021 mainly on account of higher fuel and power charges as well as market induced rise in salaries and wages. DFSM’s gross loss considerably shrank during the year to clock in at Rs. 24. 79 million. While distribution expense dipped by 12. 8 percent year-on-year in 2021, administrative expense posted massive jump of 117. 41 percent owing to provision worth Rs. 20. 767 million for doubtful debts booked by the company. Operating loss thinned down by 36. 94 percent in 2021 to clock in at Rs. 82. 34 million. Finance cost gave respite as it declined by 53. 96 percent year-on-year on account of multiple discount rate cuts during the year. Due to making persistent losses, the company suffered from liquidity crunch and was in the process of continuously restructuring its loan portfolio. DFSM posted net loss of Rs. 125. 45 million, down 36. 60 percent year-on-year with loss per share of Rs. 1. 15 in 2021. 2022 was another year in a row where DFSM’s topline showed an uptick to clock in at Rs. 694. 23 million. 15. 24 percent year-on-year rise in topline recorded in 2022 was mainly due to higher spinning charges coupled with a small amount of raw materials sale made during the year. The topline growth couldn’t bear any fruit as enormous cost of sales on the back of mushrooming fuel and power cost, salaries and wages as well as depreciation charges culminated into a gross loss of Rs. 117. 10 million which was 372. 48 percent higher than the gross loss recorded in the previous year. Operating expense ticked down during the year on the back of lesser provision for doubtful debt booked, yet, operating loss magnified by 106. 84 percent during 2022 to clock in at Rs. 170. 32 million. Finance cost dealt a mighty blow to the bottomline as it grew by 26. 97 percent in 2022. This was because discount rate saw several upward revisions during the year. Net loss for the year grew by 53. 83 percent to clock in at Rs. 192. 99 million with loss per share of Rs. 1. 97. In 2023, DFSM’s net sales dwindled by 29. 66 percent to clock in at Rs. 488. 34 million. This was on account of low demand as well as shut down of the plant during the latter half of the year due to working capital constraints and also because of repair & maintenance. Elevated fuel & power charges, depreciation as well as payroll expense didn’t allow cost of sales to shrink proportionately, resulting in 94. 68 percent escalation in gross loss which clocked in at Rs. 227. 98 million in 2023. Administrative expense slid by 25. 32 percent in 2023 mainly due to no provision booked for doubtful debts during the year. Distribution expense multiplied by 34. 71 percent in 2023 due to higher payroll expense as well as vehicle running expense incurred during the year. Operating loss surged by 39. 42 percent year-on-year in 2023 to clock in at Rs. 237. 45 million. Finance cost escalated by 39. 42 percent in 2023 owing to high discount rate. Net loss climbed up by 48. 51 percent to clock in at Rs. 286. 6 million in 2023 with loss per share of Rs. 2. 93. 2024 didn’t bring any positive hope for the company. DFSMs topline shrank by 8. 59 percent to clock in at Rs. 446. 38 million in 2024. The company was in the process of getting its loan restructured and hence it faced severe working capital constraints which forced it to produce yarn on contractual basis in order to stay operational. Rising inflation, elevated fuel and power charges as well as high salaries and wages resulted in 93. 48 percent bigger gross loss of Rs. 441. 08 million recorded by DFSM in 2024. Administrative expense shrank by 11. 83 percent in 2024 due to lesser miscellaneous expense and other expense recorded during the year. Distribution expense ticked up by 7. 65 percent in 2024 due to higher salaries of sales force and increased vehicle running expense incurred during the year. Operating loss multiplied by 103. 23 percent to clock in at Rs. 482. 57 million in 2024. Finance cost dropped by 99. 62 percent in 1HFY24 as the company didn’t make any provision of mark-up on loan amounting to Rs. 109. 126 million and approached its lenders for further restructuring of its loan. In 2024, DFSM also recognized other income of Rs. 79. 85 million as it booked reversal of the provision booked on doubtful debts and doubtful advances. Net loss of the company stood at Rs. 383. 06 million in 2024, up 33. 66 percent year-on-year. The net loss would’ve been higher by Rs. 109. 126 million, had the company booked provision of mark-up in respect of bank borrowings. Loss per share stood at Rs. 3. 92 in 2024. In 2025, DFSM recorded net sales of Rs. 219. 25 million, down 50. 88 percent year-on-year. The reason for the lackluster performance was same as mentioned before – working capital constraints. The company continued to produce yarn on contract basis to stay operational. Cost of sales dipped by 48. 29 percent in 2025, resulting in 45. 66 percent thinner gross loss of Rs. 217. 02 million. Administrative slumped by 17. 79 percent in 2025 due to lower payroll expense and a considerable decline in legal & professional charges. DFSM streamlined its workforce from 220 employees in 2024 to 134 employees in 2025. Distribution expense also nosedived by 14. 86 percent in 2025 due to lesser travelling and vehicle running expense incurred during the year. This enabled the company to cut down its operating loss by 43. 19 percent to clock in at Rs. 274. 14 million in 2025. Finance cost dropped by 49. 76 percent in 2025 which only included bank charges. Other income also deteriorated by 51. 97 percent in 2025 due to considerable decline in reversal of provision on doubtful debts. DFSM recorded net loss of Rs. 213. 301, down 44. 32 percent year-on-year in 2025. This translated into loss per share of Rs. 2. 18 in 2025. During the year, the company approached its lenders for further restructuring of loans without mark-up. The outstanding mark-up till date was recorded at Rs. 208. 531 million. In order to improve its operational efficiency and cost competitiveness, the company replaced its obsolete ring spinning technology with auto core spinning technology in 2025. The company sold off its outdated machinery at a gain of Rs. 21. 046 million which was recorded as other income. For the new machinery, the company secured non-interest bearing loan from its related party which is payable on demand. Another positive development recorded during the year was revaluation surplus recorded on the company’s property, plant and equipment which took its capital reserve from Rs. 2164. 136 million in 2024 to Rs. 10, 889. 933 million in 2025. This boosted DFSM’s equity by 747 percent to clock in at Rs. 9731. 106 million despite greater accumulated loss. Recent Performance (1HFY26) During the first half of the ongoing fiscal year, DFSM recorded a tremendous 46. 81 percent year-on-year growth in its net sales which clocked in at Rs. 112. 07 million. The company continued the production of yarn on contractual basis and recognized spinning income. The new auto core spinning technology seemed to have played its role in buttressing the company’s operational efficiency. This is evident by only 12. 11 percent uptick recorded in cost of sales in 1HFY26. This enabled DFSM to compress its gross loss by 4. 20 percent to clock in at Rs. 155. 62 million in 1HFY26. Administrative and distribution expense also diminished by 9. 27 percent and 9. 74 percent respectively in 1HFY26 due to lower inflation, stable currency and POL prices. The company also booked 39. 55 percent thinner reversal of provision on doubtful debts in 1HFY26. Operating loss slid by 1. 14 percent to clock in at Rs. 163. 51 million in 1HFY26. As the company was still in the process of getting its loan restructured further, it didn’t book provision of mark-up for the period amounting to Rs. 30. 313 million. Finance cost which comprised of only bank charges decreased by 46. 89 percent in 1HFY26. Other income diluted by 52. 49 percent in 1HFY26 seemingly due to high-base effect as the company sold off its fixed assets at a gain in the previous year. Monetary easing might also have played a role in lowering the company’s other income in 1HFY26. DFSM posted net loss of Rs. 136. 09 million in 1HFY26, down 11. 22 percent year-on-year. This translated into loss per share of Rs. 1. 39 in 1HFY26 versus loss per share of Rs. 1. 57 recorded in 1HFY25. Future Outlook As of December 31, 2025, the company’s current liabilities exceed its current assets by over Rs. 1. 73 billion. The company hadn’t booked provision for markup against the outstanding liabilities and is in the process of further loan restructuring along with waiver for non-provided mark-up. Its accumulated losses stood at Rs. 2. 204 billion as of December 31, 2025. The company has outstanding restructured liabilities of Rs. 393. 602 million along with mark-up of Rs. 208. 513 million as of December 31, 2025. Furthermore, its short-term finance facilities amounting to Rs. 267. 10 million have been expired and no longer renewed. The company defaulted on its restructured liabilities and is in litigation with its lenders who have no longer renewed its expired short-term financing facilities. This casts serious doubts over the ability of the company to continue as a going concern.
Dewan Farooque Spinning Mills Limited
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