Nagina Cotton Mills Limited ("NCML" or "the Company") was incorporated in 1967 under the Companies Ordinance, 1984 (repealed with the enactment of the Companies Act, 2017) as a public limited company.

Mr. Enam Shaikh Ellahi (late) laid the foundation of Nagina Group ("the Group") with the incorporation of the Company in 1967. Since then, NCML has emerged as the flagship company of the Group. Over the years, the Group has expanded its operations from a single spinning company into multiple spinning entities, including a weaving company.

NCML is engaged in the production and sale of high-quality carded and combed cotton, core-spun and blended yarn for knitting and weaving. The Company operates 62,508 spindles with a yarn production capacity of approximately 24 million kgs, based on 18/s count (coarse) yarn. The Company’s total energy requirement stands at 19.2MW, which is mainly met through gas generators (66.3%), while the remainder is supplied by HESCO (27.0%), furnace oil (0.92%) and solar power (5.8%). NCML has already installed a 2.5MW solar power plant and is in the process of installing an additional 1.1MW. The Company’s manufacturing facility is located in Kotri Industrial Trading Estate, Sindh.

NCML is majority owned (~90.88%) by Nagina Group, through group companies (16.37%) and sponsoring individuals (74.52%), mainly Mr. Shaukat Ellahi Shaikh (17.47%), Mr. Shahzada Ellahi Shaikh (17.26%) and Mr. Shafqat Ellahi Shaikh (17.26%). The remaining stake of the Company rests with financial institutions (~0.08%) and the general public (~9.04%).

The considerable positions in the Nagina Group are held by the Ellahi Family. The Company's ownership structure remains stable and unchanged. The Group has a structured line of succession, however, the transfer of ownership to the next generation is yet to be realized.

The Ellahi family, operating under the Nagina Group for over five decades, has established a long-standing and successful track record in the textile sector. The Group, as one of Pakistan's oldest medium-sized textile houses, demonstrates a deep understanding of industry dynamics and an ability to navigate numerous economic cycles. The long term tenure, allows the Company to develop significant expertise in spinning and weaving sectors, and to successfully implement capacity expansion, despite the industry's highly competitive nature.

Nagina Group comprises three listed public limited companies, namely; i) Ellcot Spinning Mills Limited (ESML), ii) Prosperity Weaving Mills Limited (PWML) and iii) Nagina Cotton Mills Limited and six private limited companies i.e., i) Monell (Pvt.) Limited, ii) Icaro (Pvt.) Limited, iii) Haroon Omer (Pvt.) Limited, iv) Ellahi International (Pvt.) Limited, v) ARH (Pvt.) Limited and vi) Pacific Industries (Pvt.) Limited. The Group's strenght provides comfort in case any future obligation may arise.

NCML's board constitutes ten members out of which five are non-executive, two occupy executive roles – including the CEO, and three directors are independent.

Mr. Shahzada Ellahi Shaikh, the Chairman, possesses 48 years of experience in the textile industry and holds a bachelor’s degree in Economics and International Relations. Among the other board members, Mr. Shafqat Ellahi Shaikh has 43 years of industry-specific experience and holds a BA in Economics and Religion from Columbia University. Mr. Shaukat Ellahi Shaikh has 46 years of overall experience in the textile industry and holds a bachelor’s degree in Economics and Political Science.

Three committees: Audit, Executive, and Human Resource & Remuneration, are in place to assist the board in relevant matters and ensure proper oversight. During every quarter of FY25, board meetings were held to discuss current Company performance and updates on projected targets. The meeting minutes are documented properly. The Sponsors play an active role and provide guidance to the management in the Company's operations.

M/s. Yousuf Adil, Chartered Accountants, serve as the external auditors of the Company. The firm is listed in the A category on the State Bank of Pakistan's panel of auditors and has expressed an unqualified opinion on the financial statements of the Company for FY24..

The top-tier management positions of the operating companies within the Nagina Group (NCML, ESML and PWML) are held by the Ellahi family. The management's control vests with the Ellahi family members, with a defined reporting line to ensure operational excellence. The Company's organizational structure is broadly divided into seven functional departments: (i) marketing, (ii) finance, (iii) accounts, (iv) administration and corporate, (v) commercial (fixed asset procurement), (vi) export and (vii) internal audit.

The management team is led by Mr. Amin Ellahi (CEO), who holds a graduate degree and possesses a strong business acumen and a deep understanding of the textile industry, supplemented by a team of seasoned professionals. Mr. Shaukat Ellahi, an executive director, associated with NCML since its inception, has a strong business acumen in the textile business. Mr. Tariq Zafar Bajwa is the Chief Financial Officer and is associated with NCML since past 23 years.

The management meetings are held on a daily basis with follow-up points to resolve or proactively address operational issues, if any, eventually ensuring a smooth flow of operations. The Company’s MIS can be classified into three categories on the basis of reporting periodicity – daily, weekly and monthly.

The Company has upgraded its system from FOXPRO technology to Oracle ERP solution. It enables the users to efficiently record loom-wise packed fabric production and supports BAM-wise recording of warping, sizing, loom and folding processes. The ERP solution helps to streamline core business operations, enhance financial management and provide real-time insights for more informed decision-making.

NCML is accredited with multiple certifications for compliance and quality assurance, namely; ISO 9001:2008, Standard 100 by OEKOTEX, Global Organic Textile Standards (GOTS), Organic Content Standard, Organic Content Standard 100 and Organic Content Standard Blended.

During MY25, approximately 24.4mln MT of cotton was produced globally, compared to about 24.2 million MT in MY24. Throughout the year, low cotton production was observed in India and Pakistan. However, this was partly offset by increases in cotton production in China, the United States, and Brazil by roughly 9.7%, 19.4%, and 15.7%, respectively. China remains the largest producer and consumer of cotton worldwide (MY21-25). Pakistan's cotton output declined by approximately 30.7%, due to reduced cultivation area and a surge in duty-free imports of cotton and yarn, which disrupted domestic markets. Conversely, cotton imports increased by around 234.0% YoY during the same period to satisfy domestic demand (FY24: roughly 70.0% YoY decline). Cotton arrivals for FY24-25 totaled to about 5.5mln bales. The target for cotton production in FY26 is set at approximately 10.2mln bales.

The sector's rising dependence on imported cotton poses a supply-side risk. During the FY25 ended, imports accounted for approximately 35% of the cotton supply (~11% in FY24), adding about USD 1.27bln (USD 448mln in FY24) to the country's import bill. Textile exports reached USD 17.9bln in FY25, a modest rise from USD 16.7bln the previous year, reflecting a 7.2% year-over-year growth. The largest contribution came from the composite and garments segment, at USD 14bln, which included the weaving segment at USD 1.8bln and the spinning segment at USD 0.7bln. The production of cotton cloth in FY25 declined by approximately 0.7% year over year, reaching around 877.1mln square meters. During FY25, about 25.3% of the cotton cloth produced was exported (compared to roughly 27.2% in FY24), with the rest used for the domestic market. The country's fabric exports fell by approximately 4.4% on YoY basis in FY25 (FY24: up about 5.8% on YoY basis), with approximately 23.4% of Pakistan's cotton cloth exports going to Bangladesh (compared to about 19.9% in FY24), followed by the USA with about 8.1% of cotton cloth exports (approximately 7.8% in FY24).

In FY25, the transition from the final tax regime to the normal tax regime is expected to affect the profitability of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The recent removal of GST exemption (Finance Bill, 2025) on textile inputs for exporters registered under the Export Facilitation Scheme (EFS) will offer tax protection and create a level playing field for domestic cotton and yarn producers. Currently, international cotton prices are higher than the price of locally produced cotton. The gap has widened to approximately 9.8 cents per pound (as of July 18, 2025), resulting in an average increase of about USD 36.8 per bale of imported cotton. A greater reliance on imported cotton could lead to higher raw material costs, ultimately impacting yarn prices and profit margins for the sector. Conversely, energy and finance costs are expected to stay within a range, given the projected reduction in interest rates and the absence of any major energy tariff increases.

While the sector continues to demonstrate resilience on the export front, the margin outlook for FY26 appears challenging. Upstream segments such as spinning face greater downside risk from raw material inflation, while vertically integrated composite units with stronger export linkages are better positioned to defend profitability. Overall, the sector hinges on the ability to secure a stable cotton supply chain and navigate upcoming fiscal adjustments. Without structural improvement in domestic cotton production, earnings volatility is likely to persist.

The Nagina Group boasts a long operating history in Pakistan's local spinning industry. Although NCML's share of the spinning industry is minimal on a standalone basis, the Group's consolidated spinning capacity enhances the Company's market position.

During 9MFY25, the Company reported a revenue of PKR 15,430mln, reflecting a marginal decline from PKR 15,641mln in 9MFY24. This decrease was primarily attributable to the challenging market conditions, including the influx of duty-free and low-taxed imported yarn under the EFS scheme and a reduction in the domestic cotton crop. The Company continues to optimize its sales mix between local and international markets in line with prevailing price dynamics to sustain profitability.

During 9MFY25, the Company’s gross margins declined to 7.4% (FY24: 7.9%, 9MFY24: 8.1%) on account of yarn's demand shrinkage. This translated into a decline in operating margins to 4.6% (FY24: 5.3%, 9MFY24: 5.4%). However, finance cost decreased to PKR 532mln during the 9MFY25 (FY24: PKR 851mln, 9MFY24: PKR 649mln), which supported the net profit margins, which increased to 0.5% (9MFY24: 0.4%).

The Company's management is focused on optimizing the sales mix, pursuing product differentiation and consistently identifying cost-reduction opportunities to enhance profitability and drive market growth. However, the international market outlook remains uncertain, characterized by a rising cost structure due to higher energy prices, increased tax burden and political instability. In anticipation, NCML is installing a further 1.1MW solar power project at its mills. This initiative provides cheaper green energy, reducing cost structure while supporting environmental sustainability.

The Company fulfills its working capital requirement through a mix of internal cash flows and short-term borrowings. STB increased significantly at the end of 9MFY25 to PKR 1,806mln (FY24: PKR 688mln). The Company's net working capital cycle stretched to 86days (FY24: 81days), mainly on account of elevated trade receivable days (9MFY25: 49days, FY24: 32days). Trade assets of the Company increased to PKR 7,583mln (FY24: PKR 5,258mln) driven by higher advances to suppliers (9MFY25: PKR 2,224mln; FY24: PKR 438mln).

During 9MFY25, the Company experienced a decrease in operating cash flows to PKR 931mln (9MFY24: PKR 1,154mln; FY24: PKR 1,464mln) alonhg with a decline in finance costs (9MFY25: PKR 532mln; FY24: PKR 851mln). Interest coverages remained unchanged due to proportionate decrease in FCFO (9MFY25: 1.8x; FY24: 1.8x). Likewise, debt coverage decreased (9MFY25: 0.9x; FY24: 1.1x).

At end Mar25, the Company's leverage increased to 59.1% (FY24: 56.1%) as the total borrowings elevated to PKR 6,903mln (FY24: PKR 6,048mln). Out of the total borrowings, short-term debt constituted 26.2%. The equity base of the company enhanced to PKR, 4,779mln (FY24: PKR 4,728mln).