The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Maintains Entity Ratings of Nishat Mills Limited

Rating Type Entity
(08-May-21 )
(16-May-20 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

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. Meanwhile, the Company’s revenues are consistently on a growing trajectory, a factor of continuous BMR activities, which has helped the Company in maintaining its leading position. 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. Margins remained largely intact where growth witnessed in revenue. Segment analysis reveals enhanced reliance on home textile and dyeing – stronger margins. Nishat Mills continues to maintain a low leveraged capital structure and strong coverages signifying its very strong financial profile. The Company's association with Nishat Group as its flagship entity remains a key rating factor. Textile industry dynamics are prone to challenges posed by the third wave of the COVID-19 pandemic. The country’s textile group exports, however, have witnessed 9.06% growth during the first nine months (July-March) 2020-21 and remained at $11.35bln compared to $10.4bln during the same period last year. The trend of export orders will determine stability in the sector’s outlook in the medium term. However, the Government and SBP’s several initiatives help support export-oriented entities, providing some relief. 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 very strong financial profile despite prevailing tough conditions.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Preserving low leveraged capital structure and sound coverages remain 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. Board consists of two independent directors, while all other members are non-executive directors working with Nishat Group entities. 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. Moreover, the quality of systems and processes in place is considered very strong.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.