PACRA Assigns Initial Entity Ratings of Ellcot Spinning Mills Limited
The ratings reflect Ellcot Spinning Mills Limited adequately maintained business profile despite suppressed domestic textile sector fundamental. The company’s revenues have taken hit in past few years mainly due to price decline in exports and local segments. Recently, revenues have started to pick up, benefiting from local volumes. Textile industry in general and spinning industry in particular continues to suffer from low international commodity prices and high cost of doing business in Pakistan. Consequently, performance volatility, featured by cotton price fluctuations, is considered high on standalone basis. Moreover, the announced export package by the state and its materialization would benefit the company. The company has built a sizeable investment portfolio enhancing the exposure to market risk. However, comfort can be drawn from conservatively need blue chip stocks. The management plan to find its BMR actively through additional borrowing and restricted operating cash flows impacts the financial risk profile, that remains stretched. The designed repayment pattern provides carefully support. However the assigned rating drive comfort from the company’s liquid investment, ability to manage financial risk, and association with Nagina Group.
The rating is dependent on the company's ability to match cash flows in case it plans to accumulate more debt in future
Ellcot Spinning Mills Limited (Ellcot) was incorporated in 1991 as a public limited company. Ellcot has a spinning unit engaged in the production and sale of yarn. The company is listed on Pakistan Stock Exchange. The company presently operates with 61,728 installed spindles with all spindles operating in full capacity. Ellcot is majority (~71%) owned by Nagina Group (NG), through group companies and sponsoring individuals
Ellcot's board comprises seven members out of which six are non-executive and one occupies an executive role - the CEO. In Sep16, after the demise of Mr. Shaikh Enam Ellahi, his elder son, Mr. Shahzada Ellahi Shaikh, assumed the role of Chairman. Five directors are NG nominees (sponsor family individuals), while two directors are independent.