The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Nagina Cotton 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 - -

Nagina Cotton Mills Limited, incorporated in 1967 as a public limited company, is the flagship company of one of the oldest medium-sized textile groups in Pakistan - Nagina Group. The group has a presence in the local spinning and weaving sector through Ellcot Spinning Mills Limited and Prosperity Weaving Mills Limited. Nagina Cotton is engaged in the production of export-quality yarn and operates with a spinning unit comprising 51,708 spindles. The ratings reflect Nagina Cotton's good business profile. During 9MFY22, the Company’s revenue increased by 59% YoY to stand at PKR 8.1bln mainly due to a significant increase in local sales; export sales inched up during the period. This trend is in line with the industry due to enhanced margins in the local market. During the period, margins have improved along with an increased net income of PKR 1,158mln. Improved profitability has strengthened the cashflows and coverages. Moreover, the Company's reliance on short-term borrowings has increased significantly. However, 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 Nagina Cotton’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 on the Company’s ability to generate sufficient cash flows to fulfill its financial obligations while sustaining profitability. At the same time, prudent management of the investment portfolio is also critical. The equity base of the company is satisfactory and should be beefed up, going forward.

About the Entity
Nagina Cotton Mills Limited (Nagina Cotton) was incorporated in 1967 as a public limited company. The Company is majorly (~91%) owned by Nagina Group, through group companies and sponsoring individuals. Nagina Cotton’s current operational capacity comprises 51,708 spindles. Nagina Cotton’s board constitutes ten members out of which five are non-executive, two occupy executive roles – including the CEO, while three directors are independent. Mr. Shahzada Ellahi Shaikh is the Chairman of board. The management team is headed by the CEO, Mr. Amin Ellahi who holds a graduate degree. He is supported by a team of seasoned professionals, who supplement his expertise. Mr. Shaukat Ellahi is the Executive Director. He associated with Nagina Cotton since its inception, he is well versed in the textile business and has strong business acumen.

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.