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Khalid Siraj Textile Q3 FY26: Losses Narrow, but Operations Remain Stalled

Khalid Siraj Textile narrowed its Q3 FY26 loss, but sales remained nil, negative equity deepened and liquidity still depended on sponsor support.

Sep 23, 2026

Verdict

Khalid Siraj Textile Mills Limited’s Q3 FY26 result is an improvement in the size of the loss, not an operating recovery. The company again reported no sales in the quarter ended March 31, 2026, while its quarterly loss after tax narrowed 17.3% to Rs4.06 million from Rs4.90 million. For the nine months, the loss after tax narrowed 9.1% to Rs12.78 million. Lower administrative and other operating expenses did most of the work, while a Rs3.56 million tax credit also cushioned the nine-month loss. The core problem is unchanged: manufacturing operations have been ceased since November 2013, the balance sheet remains in negative equity, and management says continued sponsor financing is necessary for the going-concern assumption.

Results at a glance

  • Company: Khalid Siraj Textile Mills Limited
  • Ticker: KSTM
  • Reporting period: quarter and nine months ended March 31, 2026
  • Basis: company-level condensed interim financial information, unaudited under IAS 34 and subjected to limited-scope review by the auditors
  • Q3 sales: nil, unchanged year on year
  • Q3 loss after tax: Rs4.06 million, narrowed 17.3% from Rs4.90 million
  • 9MFY26 loss after tax: Rs12.78 million, narrowed 9.1% from Rs14.06 million
  • 9MFY26 operating cash outflow: Rs0.15 million versus Rs3.87 million a year earlier
  • Current-liability gap over current assets: Rs184.80 million, wider than Rs183.02 million at June 2025
  • Operations: ceased since November 2013; management says it is trying to arrange financing and recommence operations

Company and reporting basis

The official PSX filing identifies Khalid Siraj Textile Mills Limited as a Pakistan-listed yarn manufacturer with its project in Kasur. The March 2026 report is for the quarter and nine months ended March 31, 2026. It is company-level condensed interim financial information prepared under IAS 34, is explicitly labelled unaudited, and the notes state that it was subjected to a limited-scope review by the auditors. The board authorized the statements for issue on April 22, 2026, and PSX recorded transmission of the quarterly report on April 27.

That basis matters because KSTM is not reporting a conventional operating quarter. The notes state that the company has ceased operations since November 2013 and had cancelled a lease agreement for its manufacturing facility in prior years. Management says it is taking steps to recommence operations and is negotiating with financial institutions for working-capital funding, but those efforts had not materialized by the report date.

What improved

The clearest improvement was cost containment. Q3 administrative and general expenses fell 49.8% to Rs0.46 million from Rs0.91 million. Other operating expenses fell 9.9% to Rs4.79 million from Rs5.31 million. With no sales in either period, those reductions directly narrowed the operating loss by 15.7% to Rs5.24 million from Rs6.22 million.

The nine-month movement was similar, though less dramatic. Administrative expense fell 4.8% to Rs1.97 million and other operating expenses fell 9.9% to Rs14.36 million. The operating loss therefore narrowed 9.3% to Rs16.34 million from Rs18.01 million. Finance cost was only Rs4,714 for nine months and Rs33 for Q3, so reported interest expense was not the main reason for the loss.

Cash consumption also improved sharply. Net cash used in operating activities fell to Rs0.15 million for 9MFY26 from Rs3.87 million in the comparable period. The main swing came from working capital: trade and other payables contributed Rs1.83 million of cash in the current period versus absorbing Rs1.69 million a year earlier. That improvement matters for near-term liquidity, although it is not evidence of restored commercial activity.

What weakened / needs attention

The balance sheet deteriorated despite the smaller loss. Total equity became more negative, moving to negative Rs90.03 million at March 31, 2026 from negative Rs77.24 million at June 30, 2025. Accumulated losses reached Rs400.36 million. Current liabilities rose to Rs188.45 million, while current assets were only Rs3.65 million. In other words, current assets covered only about 1.9% of current liabilities, and the current-liability excess widened to Rs184.80 million from Rs183.02 million.

Liquidity is therefore the central financial risk. Cash and bank balances rose from Rs16,463 at June 2025 to Rs65,922 at March 2026, but that absolute cash balance remains negligible against the liability base. Short-term borrowings were unchanged at Rs68.18 million, long-term finances were Rs154.10 million, and accrued mark-up remained Rs16.79 million.

The operating asset base is also shrinking. Property, plant and equipment fell 4.9% to Rs278.76 million from Rs293.12 million, with no additions during the nine months and Rs14.36 million of depreciation charged. That is consistent with a business preserving an idle asset base rather than investing for an active production cycle.

Why the loss narrowed without a recovery in the business

With zero sales, the usual textile-quarter questions—volume, selling price, product mix, cotton cost and gross margin—are not meaningful for KSTM. There is no revenue bridge to explain. The economic story is a fixed-cost and asset-holding story.

Depreciation was Rs14.36 million for the nine months, almost equal to the Rs14.36 million shown as other operating expenses. This indicates that the reported operating loss is dominated by the cost of carrying and depreciating the asset base rather than by a negative manufacturing gross margin. Administrative expense adds another recurring cash and overhead burden.

The tax line also improves the reported bottom line without strengthening cash generation. KSTM recognized a Rs3.56 million tax credit for 9MFY26 and Rs1.19 million in Q3. The nine-month tax credit exactly matches the Rs3.56 million reduction in deferred liabilities between June 2025 and March 2026. That strongly suggests, as an inference from the statements, that the credit is a non-cash deferred-tax effect rather than an operating cash inflow. Investors should therefore separate it from recurring operating improvement.

Finance cost deserves similar caution. Despite substantial legacy borrowings, reported finance cost is almost nil. KSTM’s FY2025 annual report says the company was in litigation with financial institutions and was not being charged mark-up on certain borrowings. That means the current income statement does not carry a normal market-rate financing burden on the legacy debt. The low finance-cost line should not be read as evidence that the liability structure is light.

Cash flow improved, but sponsor dependence remains

The cash-flow statement is better than a year ago, but it does not yet show self-funding operations. Before working-capital changes, the nine-month cash loss was Rs1.97 million. The improvement to only Rs0.15 million of operating cash outflow depended heavily on the Rs1.83 million increase in trade and other payables.

Financing activities then contributed a net Rs0.20 million according to the cash-flow statement, leaving period-end cash at about Rs65,923. The going-concern note is more important than that small increase in cash: management explicitly says the company has managed liquidity through sponsor financing and that its ability to continue as a going concern is dependent on continued financing from sponsors. It also says negotiations for institutional working-capital finance had not yet materialized.

This makes the next funding event more important than small quarterly expense fluctuations. If a credible working-capital facility is secured, the question becomes whether KSTM can actually restart production at an economically viable utilization level. If it is not secured, the company remains dependent on sponsors while the asset base continues to depreciate and negative equity deepens.

Sector context: a difficult market is not the main explanation

Management points to weak textile demand, high production costs, power tariffs and global geopolitical tension. The public macro data show a mixed environment rather than a complete absence of demand. Pakistan Bureau of Statistics data show total merchandise exports in March 2026 down 14.0% year on year in US-dollar terms, while cotton-yarn export value in rupee terms was up 8.0% year on year for the month, although down 16.9% from February.

That distinction matters. Industry conditions can affect the economics of any attempted restart, but they do not explain KSTM’s current zero sales: the company’s own filings say operations have been ceased since 2013. An active spinning peer or an industry export series is therefore not a clean earnings benchmark for this quarter. The relevant comparison is KSTM’s own long-running inactive state.

The historical pattern reinforces that conclusion. The FY2025 annual report shows nil turnover in FY2022, FY2023, FY2024 and FY2025, after only Rs3.30 million in FY2021. The March 2026 filing extends that pattern through nine months of FY2026. The smaller Q3 loss is consequently an efficiency improvement within an inactive business, not a break in the revenue trend.

Recurring versus exceptional

  • Recurring or structural: no operating sales; administrative overhead; depreciation on the remaining property, plant and equipment; the working-capital deficit; negative equity; and dependence on sponsor financing. These are the items most likely to persist unless the company actually restarts.
  • Potentially non-recurring or non-cash: the Rs3.56 million nine-month tax credit, which appears tied to the reduction in deferred liabilities, and the timing of working-capital movements through payables. Neither should be treated as a substitute for revenue generation.
  • Not yet an earnings driver: management’s stated efforts to obtain bank financing and recommence operations. Until financing is actually arranged and production resumes, these are plans rather than reported operating performance.

What to monitor next

  • Watch for a concrete financing announcement rather than another statement of intent. The going-concern note says institutional financing had not materialized by the March report date. Any facility should be assessed for amount, tenor, security, pricing and whether it is sufficient to fund raw materials and restart costs.
  • Look for evidence of physical restart: production volumes, utilization, raw-material purchases, employee or utility cost changes and, ultimately, sales. Without those indicators, a lower quarterly loss remains cost containment rather than business recovery.
  • Monitor sponsor support and the current-liability gap. Sponsor financing is explicitly central to the going-concern assumption. Current assets of Rs3.65 million against current liabilities of Rs188.45 million leave little balance-sheet room for delay.
  • Separate accounting relief from cash earnings. A future reduction in the tax credit or a change in deferred-tax accounting can move net profit or loss without changing the underlying operating economics.
  • Financing conditions have become less forgiving after the reporting date. The State Bank of Pakistan kept the policy rate at 10.5% on March 9, 2026, then raised it to 11.5% effective April 28. Policy rates are not the same as KSTM’s borrowing cost, but a higher benchmark matters if management is trying to arrange fresh working-capital finance.

AlphaGen model outputs

  • Alpha QoQ Score: N/A
  • TTM Performance Score: N/A
  • 3Y Business Perf Score: N/A
  • Sector Leadership Score: 57.0378

These four measures are AlphaGen model outputs, not company-reported figures. No other model or market signal is used in this analysis.

Sources

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