PACRA Maintains Entity Ratings of Prosperity Weaving Mills

The ratings reflect Prosperity Weaving's adequately maintained business profile despite suppressed domestic textile sector fundamentals. The company’s revenues have taken a consistent hit in recent years mainly due to price decline both in exports and local segments. However, support from efficiency gains – a factor of production technology upgradation – has augmented core margins. Prosperity maintains a reasonably diversified geographical presence. Prosperity Weaving intends to gradually build a sizable investment portfolio; though conservatively investing in blue chip stocks, market risk remains. Financial risk remained stretched owing to (i) additional debt for regular BMR, and (ii) limited improvement in operating cashflows impacting the company's debt servicing ability, in turn, coverages. However, the assigned ratings derive comfort from the company's liquid investments, ability to manage financial risk, and it’s association with Nagina Group.

The ratings may be impacted in the absence of incremental cashflows vis-à-vis debt accumulation further deteriorating the financial profile.

About the Entity
Prosperity Weaving Mills Limited (Prosperity Weaving), incorporated in November 1991, is primarily engaged in production of home furnishing greige fabric. The company presently operates with 276 air-jet looms with annual capacity of ~58mln sq. meters. The company is listed on Pakistan Stock Exchange. Prosperity Weaving is majority owned by Nagina Group (88%), through key sponsoring individuals and group companies.

Prosperity Weaving's board of directors, comprising eight members including the Chief Executive Officer (CEO), is dominated by sponsoring family. In Sep16, after the demise of Mr. Shaikh Enam Ellahi, his elder son, Mr. Shahzada Ellahi Shaikh, assumed the role of Chairman. The CEO, Mr. Shaukat Ellahi Shaikh, has been associated with the company since its inception.