The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Tata Textiles Mills Ltd

Rating Type Entity
(27-Jun-23 )
(30-Jun-22 )
Action Maintain Upgrade
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

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 others). On July 1, 2021, Salfi Textile Mills Limited, Island Textile Mills Limited, and Tata Energy Limited have been merged into Tata Textile Mills Limited (the Company). The merger has further solidified the Company’s position as one of the largest spinning mills in Pakistan with plant capacity increasing from 44,400 spindles to 127,092 spindles. This will result in a much larger and stronger combined Balance Sheet position.
During 9MFY23, Company’s topline witnessed a decline and stood at PKR 23.6bln (FY22: PKR 35.1bln); Sales are done both locally and in export. In 9MFY23 company’s profitability stood at PKR 302mln. The company’s coverage was also diluted, attributable to the significant increase in the short-term borrowings that stood at 14bln during 9MFY23 (FY22: 6.5bln). The net working capital cycle increased to 196 days (FY22: 143 days). The long association of experienced and professional management team adds comfort. Going forward, the restoration of margins and profitability remains essential. The strengthening of coverage and efficient management of working capital is vital. The company has presented that there is recovery and future profitability is expected to improve.
Textile exports in 9MFY23 were valued at $10.08bln, an 8% YoY decline. Lower demand, high cotton prices, and weak yarn demand contributed to the export decrease. Bedwear saw the largest decline of 19%, while knitwear dropped by 10%. Cotton yarn experienced a significant decline of 35%. Demand is expected to improve post-Jun-23 despite inflationary pressures.
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.

About the Entity
Tata Textile Mills Limited, incorporated in 1991 and a Public Listed Company, is engaged in the manufacturing and sale of different varieties of yarn. In the early 90s, TATA group set up Tata Textile Mills Limited as part of expanding its emerging business base. The corporate office of the Company is located at Textile Plaza, M.A. Jinnah Road, Karachi, whereas, the vicinity of the plants is in District Muzaffargarh, in the province of Punjab. The Company is operating 2 manufacturing units with a combined capacity of 44,400 spindles.
The CEO, along with other family members and associated companies collectively owns the majority (75.95%) shares of the Company. The remaining shareholding of the Company is held by mutual funds (9.03%), the general public (14.32%), and others (0.7%). 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-executives, and four independent members. Mr. Mazhar Valjee is the Chairman of the board. He has diverse experience in the field of the textile sector, bringing specialized and comprehensive experience and knowledge to the board

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.