PACRA Maintains the Entity Ratings of Reliance Cotton Spinning Mills Limited

Reliance Cotton Spinning Mills Limited ('Reliance Cotton" or 'the Company') holds an adequate position in the spinning segment, on a standalone basis. The Company is known for its superior quality and wide range of yarn products, nationally and internationally. Reliance Cotton's product mix includes 6 Ne to 80 Ne (single & double yarn), plied, slubs, mélanges, and blends. The Company has an installed capacity of ~57,600 spindles and mainly generates revenue from the export (~81%) and local market (~19%). Reliance Cotton enjoys an established customer base with several export destinations in Italy, Portugal, Argentina, and Bangladesh along with renowned local customers. Despite the susceptibility to economic trends, the Company's topline, margins, and in turn profits post stability; however, remain lean. Going forward, the spinning sector in Pakistan seems to remain challenged during CY25 due to rising costs, high energy tariffs, and limited competitiveness. The economic patterns have pose some recovery since Jan-25, yet the profitability margins may remain under pressure. The reliance on imports is expected to grow. The Company holds a supportive business risk profile with a stable cushion from the investment income. Reliance Cotton holds an adequate investment portfolio, ~PKR 1bln as of Dec-24. In Nov-24, Amer Cotton Mills (Pvt.) Ltd., a Group company, has been merged with and into Reliance Cotton. Also, the Company has entered into an agreement with Samsung Electronics Co. Ltd., Korea, and Samsung Gulf Electronics Co., FZE, UAE, through Sapphire Electronics (Pvt.) Ltd. - a wholly owned subsidiary. The agreement is to manufacture and/or assemble Samsung-branded electronic products & home appliances to sell in Pakistan. The envisioned initiatives require time to generate substantial income for the Company and remain imperative. On the financial risk front, the Company holds an adequate working capital cycle. While coverages and capital structure remain strong. Reliance Cotton gathers synergy from its association with Sapphire Group ('the Group'), which holds a strong footing across the textile value chain, retail, dairy, and energy segments. This along with a streamlined governance framework and internal control mechanisms bodes well for the Company.
Ratings incorporate the association with the Sapphire Group and the management's ability to capitalize on growth opportunities in a competitive landscape. Moreover, operating at an optimal level and sustaining the margins remain important. Sustained capacity utilization while strengthening the business risk profile is crucial for ratings.

About the Entity
Reliance Cotton Spinning Mills Limited ('Reliance Cotton" or 'the Company') was incorporated as a listed company in 1991 under the umbrella of Sapphire Fibers Limited & Mills. The Company started its operations in Jul-92 and is exclusively engaged in the spinning business. The core operations include manufacturing and export of a wide range of premium quality yarn products. A major stake of ~66% is held by the Sponsors - the Sapphire Group through associated companies. Directors hold (~8%) stake, and Financial Institutes and Joint Stock Companies hold (~5%) stake of the Company. While the remaining stake of (~21%) is held by General Public. The Board is chaired by Mr. Shahid Abdullah, while, Mr. Shayan Abdullah serves as the CEO. He is assisted by a team of professionals.