The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Prosperity Weaving Mills Limited

Rating Type Entity
(23-Sep-22 )
(24-Sep-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Prosperity Weaving Mills Limited, incorporated in 1991, is a part of one of the oldest medium-sized textile groups in Pakistan - Nagina Group. The group has a presence in the local spinning sector through Nagina Cotton Mills Limited and Ellcot Spinning Mills Limited. The ratings reflect the improving business profile of Prosperity Weaving; characterized by increased revenue along with adequate margins. The Company is engaged in the production of greige fabric and operates with a weaving unit comprising 326 looms. In recent years, the company has replaced some of the old looms under BMR projects to improve operational efficiency. The production capacity in terms of looms has remained largely stagnant. During 9MFY22, the company’s top line increased by 56% YoY to stand at PKR 8.9bln; resultant of higher capacity utilization accompanied by better prices. Prosperity Weaving caters to the need of local industry as well as export markets. Moreover, exports have increased YoY constituting 30% of total revenue (9MFY21: 25%). During 9MFY22, margins have decreased due to higher costs incurred causing a marginal decrease in net income clocking in at PKR 433mln (9MFY21: PKR 436mln). The company has a modest leveraged capital structure. The financial risk matrix of the company has shown improvement over the years. The assigned ratings derive comfort from Prosperity weaving’s association with the Nagina Group. During FY22, Pakistan's textile exports surged to $19.3bln (recording a growth of 26%). Exports grew owing to increased volumetric growth of (16% YoY) in the value-added segment, a steep rise in global demand, and record high cotton prices. Under the value-added category, the knitwear segment remained the top performer by posting 34% YoY growth in exports to $5.1 billion in FY22 due to a sharp rise in global demand, especially in the US and European countries. Other value-added segments such as ready-made garments, bed wear, and towel posted YoY growth of 29%, 19%, and 19% to $3.9 billion, $3.3 billion, and $1.1 billion respectively. However, a slowdown is expected in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries.
The ratings are dependent upon sustained market position of the Company. Moreover, the Company’s ability to generate enough cash flows to fulfill its financial obligations is critical, along with prudent investment decisions. The equity base of the company is satisfactory and should be beefed up, going forward.

About the Entity
Prosperity Weaving was incorporated in 1991 as a public limited company. The majority stakes (87.49%) of the Company are held by Nagina Group, through group companies and sponsoring individuals. Prosperity Weaving's board comprises ten members out of which six members are non-executive directors, while one director carries the executive role and three are independent directors. Mr. Shahzada Ellahi Shaikh is the Chairman of board. The management team is headed by the CEO Mr. Raza Ellahi who is well versed with the textile business providing requisite acumen. He is supported by a team of seasoned professionals, supplementing his expertise.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.