PACRA Maintains the Entity rating of the Ellcot Spinning Mills Limited

The assigned rating of Ellcot Spinning Mills Limited (“ESML” or “the Company”) reflects the prominent profile of the sponsoring group – Nagina Group (“the Group”), one of the oldest medium-sized textile groups in Pakistan. The Group includes six private limited companies and three publicly listed companies, including Nagina Cotton Mills Limited (NCML) and ESML in spinning, as well as Prosperity Weaving Mills Limited (PWLM) in weaving. The rating takes comfort from the consolidated financial strength of the sponsoring group and ESML’s reputable clientele that it has acquired over the years. The Company has maintained strategic investments in mutual funds, listed stocks, and term deposits that can be liquidated when needed. ESML is engaged in the production of pure cotton and polyester cotton through a spinning unit with an installed capacity of 79,200 spindles, mainly serving local markets while maintaining a global client base. To improve operational efficiency, ESML plans to incorporate BMR initiatives over the next couple of years. The Company has achieved capacity utilization of 100.0% with a production capacity of ~16.5mln Kg. ESML has also undertaken renewable energy initiatives aimed at creating a cushion in its cost structure. During the year, ESML increased the capacity of its solar power plant to 2.4MW from 1MW and plans to further expand with a 1.1MW solar power plant in the next three months, fully financed through traditional loans. This addition will raise the Company’s overall solar capacity to 3.5MW. The spinning industry suffered due to international price declines and diminished local production. Moreover, China's reciprocal tariffs with the USA had suppressed demand in the global markets during the period. During 9MFY25, the Company reported a topline of PKR 12.1bln (FY24: PKR 15.5bln, 9MFY24: PKR 11.3bln), reflecting YoY growth of 7.1%. The Company has sustained its profitability on the back of high-quality products, moving to 26/s count yarn production. However, the gross profit margins decreased by 0.5% during the nine months, translated from elevated energy costs (9MFY25: 6.5%, 9MFY24: 7.0%). The company's bottom line surged to PKR 110mln, a 103.1% increase (FY24: PKR 153mln, 9MFY24: PKR 54mln), reflecting diminished finance costs and buffer from investment returns. The company's financial risk is considered moderate, with a stretched working capital structure, fulfilling its requirements through a combination of short-term borrowings and internally generated cash flows. The Company maintains a long-term-financed capital structure with moderate coverage ratios and cash flows.
The ratings are dependent on the Company’s ability to increase business margins through operational efficiencies and product quality. The sustainability of cash flows and coverages at a comfortable level remains critical for the ratings. Going forward, consistent growth in accumulated profits should supplement the equity levels.

About the Entity
ESML was incorporated in 1988 as a public limited Company. The core operating activity of the Company is the manufacture and sale of yarn with a production capacity of 79,200 spindles. The Company operates with a production capacity of ~16.5mln kg. ESML is majorly (~71%) owned by Nagina Group, through group companies and sponsoring individuals. The board comprises 10 directors, which includes 05 non-executive directors, 03 independent directors & 02 executive directors. Mr. Shahzad Ellahi Shaikh is the Chairman of the Board, and Mr. Haroon Shahzada Ellahi Shaikh is the CEO of the Company.