PACRA Maintains the Entity Ratings of Nishat Mills Limited

The Nishat Mills Limited (“the Company” or “NML”) ratings reflect a sponsor's strong financial strength and business profile. The NML is considered the leading group in Pakistan's textile industry with its strategic diversity vested in all respects of the textile product value chain. This stems from its remarkable history as the largest export-based, fully integrated unit along with a sizable strategic portfolio on a standalone basis. In segment-wise business contribution, the Spinning sector is the foremost segment, followed by Weaving, Dyeing, Home Textile and Terry, Garments, and Power Generation. The product slate of the Company primarily divests into Yarn, Grey Cloth, Processed Cloth, Made Ups, and Garments. During 6MFY24, a shift in international consumption & demand patterns has been observed mainly due to the global recession and slightly impacted the NML volumetric sales in the Grey Cloth, Processed Cloth, and Garments products segment. During 6MFY24, the top line of the Company stood at PKR 76.97bln (FY23: PKR 141.75bln) mainly dominated by export sales and indirect export sales have created a buffer in the local sales segment. The top clients and suppliers of the Company are well-established and stable entities that provide comfort to the business sustainability. The prime export destinations of the NML are spread across the countries of Europe, Asia, Africa, Australia, and the USA. The margins of the Company dipped minutely mainly on the back of expensive material procurement and a hike in energy costs inflated the cost of production coupled with magnifying finance costs. The Company's strong business fundamentals and optimal diversification have enabled them to cope with these challenges. The Company has already commissioned solar projects of 14.2 MW and 2.562 MW solar plants in the installation phase to manage energy cost risk. The Company is in the process of executing CAPEX in the Denim and Technical fabrics segment to further bolster and diversify its revenue streams by exploring multiple international markets and export avenues. The Company has maintained hefty long-term investments in group companies which provide comfort to the liquidity position and dividend income has created a cushion in the profitability matrix of the Company. The financial risk profile of the Company is considered moderate. The working capital cycle of the Company is slightly stretched depicts the industry norm. The working capital requirements of the Company are primarily met through internally generated cashflows and short-term borrowings. The magnifying finance cost impacted the coverages and net cash flows of the Company. The Company has maintained a moderately leveraged capital structure.
The ratings are dependent on the Company's ability to sustain business growth while generating sufficient cashflows and maintaining the profitability matrix at an optimal level. The sustainability of margins and improvement in coverages while expanding business volumes remain critical. The adherence to the debt matrix at an optimal level is a prerequisite for the assigned rating.

About the Entity
Nishat Mills, established in 1951, is the largest textile composite unit and the country's leading exporter in the respective market. The Company’s majority stake (~51%) is owned by members of the Mansha family and Nishat Group companies. Nishat Group – a leading conglomerate – maintains a substantial presence in the country's financial sector and a strong foothold in the Textile, Cement, Power, and Hospitality sectors. The Group has also ventured into 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 – Mr. Hassan Mansha and the CEO, Mr. Umer Mansha.