PACRA Assigns Preliminary Debt Instrument Rating to Nishat Mills Limited - PPSTS - PKR 7.0bln – TBI

Nishat Mills Limited (“NML” or “the Company”) is a leading name in Pakistan’s textile industry, renowned for its large-scale operations and global presence. NML serves as the flagship company of the Nishat Group, one of Pakistan’s largest conglomerates. As a fully integrated textile powerhouse, it operates across the entire textile value chain. It is guided by a vision of safeguarding stakeholders’ interests, driving industry leadership, and making meaningful contributions to the national economy. NML adheres to rigorous compliance standards, with a strong emphasis on sustainable, long-term financial growth. It offers a diverse product portfolio, including yarn, grey cloth, processed fabric, towels and bathrobes, made-ups, and garments. The revenue mix remains heavily skewed toward exports, supported by a stable global clientele across America, Africa, Asia and Europe. It pursues a volume-driven growth strategy, with each business segment structured as an autonomous profit center. The topline witnessed a consistent volumetric expansion over the years, underpinned by state-of-the-art production mechanisms and continuous BMR initiatives. Despite industry-specific challenges and a stable exchange rate environment, NML achieved a topline of PKR 178.1bln (FY24: PKR 160.2bln). The gross profit margin posted a slight improvement, primarily driven by improved cost structure through renewable energy alternatives. Net profitability was augmented by a sizable investment portfolio parked with capital market placements and strategic equity holdings. During the year, an upward revision to the minimum wage rate policy partially countered the expected benefits from monetary easing. The Company secured a bottom line of PKR 6.0bln (FY24: PKR 6.3bln). NML maintains a strong financial risk profile, albeit with a leveraged capital structure, supported by healthy liquidity, underpinned by significant allocation to equity instruments. The working capital requirements are met through a mix of internally generated cash flows and short-term borrowings. The coverage indicators of the Company show a modest recovery, with the same trajectory projected in the following quarters.
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 (“NML” or “the Company”) is a public limited company established in 1951. The Company’s majority stake (~51%) is owned by the Mansha family through individuals and group companies. The 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 7.0bln (inclusive of a green shoe option of PKR 2.0bln). The tenor of the instrument will be six months from the date of issue, carrying a profit rate of 3 Month Kibor + 05 bps, payable at maturity along with the principal amount. The purpose of the instrument is to finance the working capital requirements of the Company. It has a call option, exercisable after three months of the issue date, following a 5-day prior notice. Once exercised, the call option is irrecoverable.