PACRA Maintains the Entity Rating of Ellcot Spinning Mills Limited

Ellcot Spinning Mills Limited ("ESML" or "the Company") is part of one of Pakistan's oldest and well-established medium-sized textile clusters - the Nagina Group. The Group's spinning operations are carried out through ESML and Nagina Cotton Mills Limited, while Prosperity Weaving Mills Limited undertakes weaving. The Company continues to derive rating comfort from the Group's diversified, vertically integrated textile profile. ESML manufactures pure-cotton and polyester-cotton yarn through a spinning unit of 79,200 spindles, with capacity utilization maintained at healthy levels. The Company specializes in finer-count yarn suited to its predominantly domestic sales profile. Intra-group linkages remain a key operational strength, with a portion of output placed with the Group's weaving entity, lending greater revenue stability. Energy requirements are met through a diversified mix of gas, furnace oil, grid, and solar. The Company has enhanced its solar capacity to 6.5MW — around 31% of its total installed generation capacity of 21MW. Under its ongoing BMR program, new spinning machinery was inducted during the year, alongside a power-optimization initiative shifting load toward electric/solar sources, contributing to improved energy efficiency amid elevated energy costs. The domestic spinning sector remained under pressure during Jul-Mar FY26, with cotton yarn exports rising 4.42% YoY to USD562.16mln (Jul-Mar FY25: USD538.38mln), even as overall textile exports registered a marginal decline of 0.5% to USD13.545bln (Jul-Mar FY25: USD13.613bln) amid soft external demand. The sector continues to face pressure from elevated energy and input costs, taxation issues, and international competition, partly offset by resilient local demand and export yarn pricing. However, ESML's topline for 9MFY26 stood broadly flat at PKR 11,986mln, reflecting resilience against subdued sector-wide volumes, with local sales continuing to anchor overall revenue. Profitability improved with gross margin edging up to 6.4% (FY25: 6.1%) and net margin to 0.6% (FY25: 0.5%), while net income of PKR 77mln already matches the full FY25 outturn. This was accompanied by a steadier financial risk profile, with coverage and leverage metrics both strengthening during the period. Working capital remains funded primarily through receivables rather than short-term borrowings, though the cycle lengthened somewhat, keeping liquidity slightly tighter than the prior year. Governance comprises a 10-member Board with adequate representation across non-executive, independent, and executive categories, supported by active committee oversight. Continued sponsoring-family presence in both ownership and executive roles provides continuity to the Company’s strategic direction, while a stable management team, led by a CEO with over a decade and a half of industry experience, has maintained consistent execution and oversight of operations.
The ratings remain underpinned by ESML's improving coverage and leverage profile, set against a still-challenging topline environment and reliance on the domestic market. Sustaining margins through operational efficiencies, translating ongoing capacity and energy investments into tangible cost savings, and preserving the current working-capital discipline will remain key rating considerations going forward.

About the Entity
Ellcot Spinning Mills Limited ("ESML" or "the Company"), incorporated in 1988 as a public limited company, is part of the Nagina Group, which holds approximately 71% of the Company's shareholding through group companies and sponsoring individuals. The Board is chaired by Mr. Shahzada Ellahi Shaikh. The management team is headed by Mr. Haroon Shahzada Ellahi Shaikh (CEO), who brings 17 years of textile industry experience, supported by a seasoned finance and operations team, providing the requisite expertise to steer the Company's operations.