PACRA Maintains Entity Ratings of Prosperity Weaving Mills Limited
Prosperity Weaving Mills Limited, incorporated in 1991, is a part of one of the oldest medium-sized textile group in Pakistan - Nagina Group. The group has presence in local spinning sector through Nagina Cotton Mills Limited and Ellcot Spinning Mills Limited. The ratings reflect improving business profile of Prosperity Weaving; characterized by increased revenue, along with improved margins. The Company is engaged in production of greige fabric and operates with a weaving unit comprising 316 looms. In recent years, the Company has replaced some of the old looms under BMR projects to improve the operational efficiency. However, the production capacity in terms of looms has remained largely stagnant. The Company’s topline increased by 25% YoY during 9MFY21 to stand at PKR 5.7bln; a resultant of higher capacity utilization accompanied with better prices. Prosperity Weaving caters to the need of local industry as well as export markets. Moreover, exports have significantly increased during 9MFY21 constituting 43% of total revenue (9MFY20: 25%). During the period, margins have improved along with increased net income of PKR 436mln. Enhanced cashflows resulted in improved coverages. However, the Company has modest leveraged capital structure. Prices have also improved on both local and international fronts recently along with increased demand. The Company is expected to benefit from these improved industry dynamics in the medium run. The assigned ratings derive comfort from Prosperity Weaving's association with Nagina Group. Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20 due to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase. The probability of little attrition in demand remains on the horizon attributable to the outbreak of COVID-19 variants.
The ratings are dependent upon sustained market position of the Company. Moreover, the Company’s ability to generate enough cash flows to fulfill its financial obligations is critical, along with prudent investment decisions.
Prosperity Weaving was incorporated in 1991 as a public limited company. The majority stakes (~87%) of the Company is held by Nagina Group, through group companies and sponsoring individuals. Prosperity Weaving's board comprises ten members out of which six members are non-executive directors, while one director carries the executive role and three are independent directors. Mr. Shahzada Ellahi Shaikh is the Chairman of board. The management team is headed by the CEO Mr. Raza Ellahi who is well versed with the textile business providing requisite acumen. He is supported by a team of seasoned professionals, supplementing his expertise.