PACRA Maintains the Entity Ratings of Nisar Spinning Mills (Pvt.) Limited

The rating of Nisar Spinning Mills (Pvt.) Limited (“the Company” or “NSMPL”) is underpinned by the Nisar family's prominent business profile, with an established presence across diverse sectors of the economy, including chemicals, plastics, metals, spinning, and synthetic leather. The Company produces a variety of yarns, with Siro yarn being their prime selling product, followed by PVC yarn and CVC yarn. The Company's revenue is primarily driven by local sales, with exports accounting for ~20.3% of the total revenue base. During 9MFY25, NSMPL's topline declined to PKR 10.35bln (FY24: PKR 14.96bln; 9MFY24: PKR 11.65bln), primarily due to a slump in domestic yarn demand. This was driven by increased yarn imports under the EFS scheme, which constrained market liquidity for local spinners, alongside a downward trend in international cotton prices that led to lower yarn prices. Additionally, a rise in energy tariffs over the years further strained margins, resulting in a reduction of gross margins to 3.2% in 9MFY25 (9MFY24: 7.3%, FY24: 3.4%). The Company recorded a net loss of PKR 337 mln during 9MFY25. However, the recent reduction in the policy rate, along with the phased installation of a 8.5MW solar power plant under the Company’s renewable energy initiatives, is expected to provide a cushion to the cost structure in the coming quarters. The recent budgetary measure introducing 18.0% GST on imported yarn is anticipated to support the domestic spinning industry by restoring competitiveness, promoting local procurement, and reducing the distortion caused by previously untaxed imports under the EFS regime The Company’s medium-term strategy focuses on expanding its footprint in the weaving and knitting segments, aimed at strengthening its business sustainability profile and enhancing value chain integration. The financial risk profile of the Company is considered adequate, with a stretched working capital cycle that depicts the industry norm. The sponsor’s loan of PKR 2.2bln provides additional liquidity support to the Company’s funding structure, primarily to meet working capital needs, in conjunction with conventional short-term bank borrowings. The Company maintains a highly leveraged capital structure with adequate coverages and cash flows. NSML carries an advance from a buyer which according to management, is expected to be gradually adjusted against yarn deliveries as per the agreed contractual terms. The textile industry is grappling with several key challenges, including evolving global demand and consumption trends, alongside mounting pressures on price competitiveness. These pressures stem from a revision in the minimum wage, elevated energy tariffs, which despite a reduction, remain high in regional comparison, reliance on imported cotton due to an 18% GST on local procurement, and the looming imposition of a 29.0% reciprocal tariff on exports to the United States, currently deferred for 90 days
The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative. The alignment of the Company's performance with its financial projections remains vital for the ratings.

About the Entity
NSMPL was incorporated on June 14, 2005, under the Companies Ordinance, 1984 as a (Pvt) Ltd Company. Nisar Spinning Mills (Pvt.) Limited is exclusively owned by the sponsoring family (~100%) where, the ownership of the Company resides with Mr. Anjum Nisar (~81.89%) and Mr. Tariq Nisar (~18.10%). The board consists of two members: Mr. Anjum Nisar (CEO & Group chairman) and Mr. Tariq Nisar-Executive Director. The company operates two spinning units with an installed capacity of 52,800 spindles and also engages in the production of non-woven fabric, with two plants.