PACRA Assigns Preliminary Ratings to Nishat Mills Limited – PPSTS IV - PKR 7.5bln – TBI

Nishat Mills Limited (“NML” or “the Company”) is a prominent and well-established player in Pakistan’s textile industry. NML operates as a fully integrated textile powerhouse, with operations spanning from high-end spinning to finished products. The Company is guided by a vision to lead the industry by safeguarding shareholders’ interests, serving the community and contributing meaningfully to the country’s economy. Over the years, the Company has expanded its operational scale by venturing into promising segments, strengthening its presence in the value-addition space. On a standalone basis, the Company’s topline registered a modest increase to PKR 181.64bln (FY25: PKR 178.16bln). This was primarily driven by higher export sales, supported by business expansion and product diversification. Despite geopolitical uncertainties and evolving trade dynamics, the Company maintained revenue growth, although limited pricing flexibility in export markets constrained its ability to pass on elevated production costs. Profitability remained under pressure amid elevated production costs, which constrained margins. To mitigate cost pressures, the Company continued to strengthen its energy mix, with installed solar capacity reaching 41.61 MW, while an additional 4.21 MW remains under installation. However, the impact of margin compression was offset by a significant contribution from non-core income, primarily generated through capital market placements and strategic investments. Furthermore, a prudent financing strategy facilitated a reduction in the average borrowing rate, benefiting the profitability matrix. Consequently, the Company’s bottom line stood at PKR 5.4bln (FY25: PKR 6.0bln).
The Company has sizeable working capital requirements to support its integrated operations, resulting in an extended cash conversion cycle. NML maintains a sound financial risk profile. Its funding mix is a blend of internally generated cash flows and short-term borrowings. Coverage metrics of the Company remain within a manageable range, while liquidity indicators are well-managed, underpinned by significant holdings of marketable securities. The Company continues to pursue Balancing, Modernization, and Replacement (BMR) initiatives and plans to install a 20 MWp solar power plant integrated with a 35 MWp Battery Energy Storage System (BESS) at its Ferozewatwan and Bhikhi facilities. The initiative aims to optimize energy costs by utilizing stored solar power during peak-tariff hours, while further strengthening the Company’s energy efficiency and sustainability profile.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Preserving a prudent leveraged capital structure and sound coverages remains imperative.

About the Entity
Nishat Mills Limited operates as a publicly listed Company. NML serves as the flagship entity of the renowned Nishat Group. The sponsoring group carries a strong legacy of operational excellence and a well-established market presence. The Company's board comprises seven members with two directors representing the sponsoring family, including the Chairman, Mr. Hassan Mansha and the CEO, Mr. Umer Mansha.

About the Instrument
NML is set to issue a privately placed, unsecured, non-convertible shariah-compliant short-term sukuk or Islamic commercial paper of PKR 7.5bln (inclusive of a green shoe option of PKR 2.5bln). The purpose of the instrument is to finance the working capital requirements of the Company. The tenor of the instrument will be six months from the date of issue, carrying a profit rate of 3M Kibor + TBD. The profit will be paid on a quarterly basis. The Sukuk has a call option, exercisable after three months of the issue date, following a 5-day prior notice. Once exercised, the call option is irrevocable.