Muhammad Atif Chaudhry
PACRA Assigns Initial Ratings to Nishat Mills Limited | PPSTS
|Rating Type||Debt Instrument|
The ratings reflect the established position of Nishat Mills as a premier export-oriented composite unit, with a sizable strategic portfolio and conservative capital structure. The Company enjoys prominence in the textile sector due to the wide array of its products, extensive outreach, and stable customer base. Meanwhile, the Company’s revenues are consistently on a growing trajectory on account of both favorable rate and volume variance. Moreover, a factor of continuous BMR has assisted the Company in maintaining its leading position. Although the Company remained moderately leveraged, its gearing increased from ~27.97% to ~34.68% at end of FY22 mainly due to an increase in short-term borrowing. Considering the hikes in exchange rates and supply side disruption due to recent flood devastation the company is going to issue the short-term Sukuk to manage its supply chain smoothly. The Company's association with Nishat Group as its flagship entity remains a key rating factor. Textile industry dynamics are proving to be vigorous mainly due to an increase in demand for textile products internationally and the channeling of export orders towards the Pakistani market. Export’s front witnessed a strong increase and is expected to stay positive in the medium term where the demand for textile products is expected to sustain. Meanwhile, the Company continues to receive sizable dividend income from its diversified investment portfolio which provides comfort to the ratings. The Company is expected to maintain its very strong financial profile.
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remains important. Moreover, upholding of governance framework is vital.
Nishat Mills, established in 1951, is the largest textile composite unit and a leading exporter of textile products in the country. The Company’s majority stake (~51%) is owned by members of Mansha family and Nishat Group companies. Nishat Group maintains a substantial presence in the country's financial sector and a strong foothold in textile, cement, power and hospitality sectors. The Group has lately entered Pakistan's automobile assembly industry through a joint venture with Hyundai motors. The board comprises seven members with two directors representing the sponsoring family including the Chairman. The CEO, Mr. Umer Mansha, has been associated with Nishat Mills since1994 and carries extensive experience in the textile industry. An able management team assists him.
Nishat Mills Limited has issued a rated, unsecured, privately placed, short-term, Sukuk of PKR7.5bln at face value to finance the working capital requirement of the Company. The instrument has a tenor of 6 months. Profit will be paid quarterly in arrears on the outstanding principal amount at the rate of 3MK+90bps. The principal payment would be made in a bullet payment at the time of maturity.
The Issuer also has an option to redeem in full or part the outstanding face value of the Sukuk. The Call Option may be exercised by the Issuer at any time on or after 3 (three) months from the Issue Date. In case of exercise of the Call Option, the Issuer will pay the outstanding Issue Price allocated to the outstanding Sukuk Certificates along with any declared profit amount.