PACRA Maintains Entity Ratings of Nishat Mills Limited

The ratings reflect the established position of Nishat Mills as a premier export-oriented composite unit, with a sizable strategic portfolio and conservative capital structure. The Company enjoys prominence in the textile sector due to the wide array of its products, extensive outreach, and stable customer base. During FY22, the Company’s top line was recorded as historically high attributable to a high demand pattern for textile products. Moreover, a factor of continuous BMR has assisted the Company in maintaining a leading position in the textile universe. The diverse and sizable investment portfolio, emanating from the Company's implicit Holdco status within the Group, generates a regular dividend stream, supporting core income recorded at PKR 3.3bln (FY21: PKR 2.7bln). The company has a moderately leveraged capital structure. The leveraging increased to 34.7% (FY21: 28%) primarily due to an increase in short-term borrowings. The Company's association with Nishat Group as its flagship entity remains a key rating factor. During 1HFY23, the company’s revenue base illustrated positive growth on a YoY basis. The Company displayed a hike in short-term borrowings driven by unfavorable prices. Meanwhile, the Company continues to receive sizable dividend income from its diversified investment portfolio that provides comfort to the ratings. The Company is expected to maintain its strong financial profile, going forward. During 9MFY23, the textile exports were valued at $12.47bln compared to $14.24bln, reflecting a 12% decline YoY - the declining trend has been recorded in the last two quarters. The Country’s textile exports for the month of March clocked in at US$1.26bln, up 7% MoM. The decline in the previous overall exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand in international markets is also a challenge. During the month of March, value-added textile exports increased by 6% MoM to US$863mln mainly due to Readymade Garments and Knitwear increasing by 8% and 12% MoM respectively while towels decreased by 6% MoM. Basic textiles witnessed an increase of 8% MoM to US$230mln in Mar-23. In volume terms, Knitwear, Readymade Garments, Bedwear, and Towels increased by 18%, 13%, 5%, and 2% MoM respectively. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve in the upcoming quarters.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Preserving low-leveraged capital structure and sound coverages remains imperative.

About the Entity
Nishat Mills, established in 1951, is the largest textile composite unit and a leading exporter of textile products in the country. The Company’s majority stake (~51%) is owned by members of the Mansha family and Nishat Group companies. Nishat Mills also holds shareholding in multiple strategic investments of Nishat Group. Nishat Group – a leading conglomerate – maintains a substantial presence in the country's financial sector and a strong foothold in the textile, cement, power, and hospitality sectors. The Group has lately entered Pakistan's automobile assembly industry through a joint venture with Hyundai Motors. The board comprises seven members with two directors representing the sponsoring family – including the Chairman – Mr. Hassan Mansha and the CEO. The CEO, Mr. Umer Mansha, has been associated with Nishat Mills since 1994 and carries extensive experience in the textile industry. He is supported by an experienced management team.