PACRA Upgrades Entity Rating of Tata Textile Mills Limited
Tata Textile Mills Limited – a public listed company - primarily engaged in the manufacturing and sale of different varieties of yarn (siro yarns, Modal blend yarn, Tencil blend carded, slub yarn, spun yarns, plied carded & combed yarn and some other). During FY21, Company’s revenue improved to PKR 27.1bln (FY20: PKR 20.6bln); Sales have been done both in local and export market. The primary reasons are enhanced sales volume, favorable yarn prices as well as inventory gains in FY21. In FY21, Company’s profitability stood at PKR 2.08bln. The upgrade incorporates robust improvement in topline and margins in 9MFY22. The ratings of Tata Textile reflect the financial risk profile of the Company, which is characterized by moderate leveraging, good coverages and adequate working capital management. Long association of experienced and professional management team adds comfort. During 9MFY22 (Jul21-Mar22), Pakistan textile exports surged to $14.2bln (recording growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth. However, month on month basis, textile exports have declined by 3.5%. Going forward, the textile sector’s outlook is expected to stay good in the medium term where demand for textile products is expected to sustain.
The ratings are dependent on improving business margins while maintaining financial risk at a low level. Prudent management of short-term liquidity and sustained coverages are important.
Tata Textile Mills limited Company incorporated in 1987 and a public listed company, is engaged in the manufacturing and sale of different varieties of yarn. The Company is operating 3 manufacturing units with a combined capacity of 127,092 spindles.
This Company is the result of a merger of three sister companies owned by the Group namely (i) Island Textile Mills Limited, (ii) Salfi Textile Mills Limited and (iii) Tata Energy Limited. In Mar21, Salfi Textile Mills Limited, Island Textile Mills Limited and Tata Energy Limited were merged into Tata Textile Mills Limited. The Scheme of Arrangement filed by the Company for merger was sanctioned by the High Court of Sindh at Karachi vide Order JCM No.13 of 2020 dated March 02, 2021 and an addendum order dated March 17, 2021, in term of which, Island Textile Mills Limited Salfi Textile Mills Limited and Tata Energy Limited stood merged with and into Tata Textile Mills with effect from July 01, 2021. The merger will further solidify the Company’s position as one of the largest spinning mills in Pakistan with a merged plant capacity of 127,092 spindles. This will result in a much larger and stronger combined Balance Sheet position. The CEO, along with other family members collectively own majority (~81%) shares of the Company. The remaining shareholding of the Company is held by mutual funds (~9%), and general public and others (~10%) . The overall control of the Company vests in nine members (Board of Directors) including the CEO – Mr. Shahid Anwar Tata. Currently, the Board comprises two Executive Directors, three Non-Executive, and four independent Directors. Mr. Mazhar Valjee is the Chairman of the Board.