PACRA Maintains Entity Ratings of Nishat Chunian Limited

The ratings reflect Nishat Chunian Limited’s (‘Nishat Chunian’ or ‘The Company’) established business profile emanating from strong presence in textile sector. As an export oriented unit, the Company posted growth of 10.6% in FY19 mainly augmented by operational efficiency and currency devaluation. The Company has significant presence in spinning sector, as it’s the largest contributor to its revenue base. Prudent procurement of cotton in FY19 led to inventory gains and better margins, supplementing profitability. The Company has a highly leveraged structure with borrowing utilized for working capital and CAPEX. Working capital cycle remains stretched, though in line with peers; any improvement will bring efficiency. The Company has extended loans to group entities resulting in higher leveraging. The ratings take comfort from Nishat Chunian’s dividend stream from its subsidiary – Nishat Chunian Power Limited – an Independent Power Producer. The dividend income is expected to remain low due to prevailing liquidity situation in the power sector.
The ratings are dependent on the management's ability to sustain growth in revenue while improving margins. Sustainability of non-core income and prudent management of the working capital are important. Maintaining coverages amidst rising interest rates would remain critical.

About the Entity
Nishat Chunian Limited - listed on the Pakistan Stock Exchange - commenced operations in 1991. Nishat Chunian is a vertically integrated composite textile unit manufacturing cotton yarn, fabric and bed wear. The Company operates with 222,708 spindles and 363 looms. The Company has established separate business units for different segments, which include (i) Spinning, (ii) Weaving, (iii) Dyeing and (iv) Stitching, each being a distinct profit center. It is majorly owned by Shahzad Saleem Family (28.4%) and Nishat Group (27.6%) through individuals and group companies. Remaining shareholding is well spread among corporates, financial institutions and general public.

Nishat Chunian has an eight-member board including the Chairman, Mrs. Farhat Saleem, and the Chief Executive Officer (CEO), Mr. Shahzad Saleem. The board comprises of four Non-Executive, two Executive and two Independent Directors. The board is compliant with the Code of Corporate Governance. The CEO, Mr. Shahzad Saleem, a LUMS alumni, is associated with the Company since inception. He is assisted by an able and experienced team of professionals.