The Pakistan Credit Rating Agency Limited
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Muhammad Hassan

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PACRA Maintains Entity Ratings of Prosperity Weaving Mills Limited

Rating Type Entity
(28-Sep-19 )
(30-Mar-19 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect modest profile of Prosperity Weaving Mills Limited (Prosperity Weaving). The Company’s revenues are on growing trajectory over the years, owing to continuous BMR translating into operational efficiency, eventually higher production volumes. The Company caters to the need of local industry as well as export markets. Textile industry has suffered from low international commodity prices in recent times. However, the impact largely mitigated by recent rupee devaluation. On standalone basis, the Company's margins have improved on account of improved product quality and prudent inventory management. Financial profile of the Company is characterized by lean working capital cycle, adequate coverages and high leveraging. Mainly emanating from BMR related borrowings. However, predominant portion of long term borrowing is availed at the State Bank's concessionary rates which has insulated the Company's interest rate exposure, amidst high interest rate environment. The Company intends to gradually build a sizable investment portfolio. This exposes the Company to market risk as exhibited by historic volatility in stock exchange. Any significant decline in investments leading to losses, and eventually equity erosion, will impact the financial profile of the Company. The management’s ability to manage this risk is critical. However, the assigned ratings derive comfort from Prosperity Weaving's association with Nagina Group.
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. At the same time, prudent management of investment portfolio is important.

About the Entity
Prosperity Weaving was incorporated in 1991 as a public limited company. The Company is engaged in production of Fabric and operates with a weaving unit comprising 324 looms. The majority stakes (~84%) of the Company is held by Nagina Group, through group companies and sponsoring individuals. The remaining shareholding rests with general public and financial institutions. Nagina Group is one of the oldest medium-sized textile houses in Pakistan. Operating under Ellahi’s for five decades, developing credential expertise in spinning and weaving over the period of time.

Prosperity Weaving's board comprises eight members out of which six members are non-executive directors, while one director carries the executive role and one is an independent director. Mr. Shahzada Ellahi Shaikh – the Chairman – carries with him over two decades of experience in local textile industry. The board members have vast knowledge of textile industry; though diversity in experiences exists as well. The directors’ expertise on different stages of the textile value-chain benefits the board in efficient decision making.

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.