The Pakistan Credit Rating Agency Limited
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PACRA Maintains the Entity Ratings of Prosperity Weaving Mills Limited

Rating Type Entity
(22-Sep-23 )
(23-Sep-22 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Nagina Group is one of the oldest medium-sized textile groups in Pakistan and Prosperity Weaving Mills Limited is the weaving arm of the group incorporated in 1991. The group also has a presence in the spinning sector through Nagina Cotton Mills Limited and Ellcot Spinning Mills Limited. The ratings reflect the intact business profile of Prosperity Weaving over the years. The Company is engaged in the production of greige fabric and operates with a weaving unit comprising 382 looms which is one of the highest in the relative universe. In recent years, the company has increased its production capacity along with replacing some of the old looms under BMR projects to improve operational efficiency. During 9MFY23, the company’s revenue increased by 22% YoY to stand at PKR 10.9bln; driven by higher capacity utilization accompanied by better prices. Prosperity Weaving caters to the needs of local industry as well as export markets. Moreover, exports constitute 40% of total revenue (9MFY22: 30%). The company’s major export base is in Europe followed by the Far East, China, and Türkiye. Margins have reflected an attrition due to the higher cost structure. The net income declined to PKR 126mln (9MFY22: PKR 433mln). Moreover, the financial matrix reveals moderate leveraging, a decline in coverage YoY, and a stretched working capital cycle. Driven by the revival of demand patterns in the export bases, the management aims to improve the financial performance in the upcoming quarters. Moreover, the management is confident that the company’s capacity utilization levels shall remain healthy. The assigned ratings derive comfort from Prosperity Weaving’s association with the Nagina Group. During FY23, textile exports were valued at $16.5 billion compared to $19.33 billion, reflecting a dip of 15% YoY – the declining trend has been witnessed by the start of FY23. The exports tumbled attributable to high energy costs, shortage of cotton, and uncertainty in the foreign exchange rate. The suppressed demand pattern exhibited by export avenues was also a challenge. During FY23, value-added products such as knitwear, bedwear, towels, and ready-made garments witnessed a decline of 13% YoY. The basic textiles including raw cotton, cotton yarn, and cotton cloth posted a drop of 21% YoY. During the month of June 2023, cotton yarn exports increased by 7% MoM. The value-added exports reported a volumetric increase of 16% on a MoM basis.
The ratings are dependent upon the sustained market position of the company. Moreover, the company’s ability to generate enough cash flows to fulfill its financial obligations is critical, along with prudent investment decisions. The equity base of the company is satisfactory and should be beefed up, going forward.

About the Entity
Prosperity Weaving was incorporated in 1991 as a public limited company. The majority stakes (87.49%) of the Company are held by Nagina Group, through group companies and sponsoring individuals. Prosperity Weaving's board comprises ten members out of which six members are non-executive directors, one director carries the executive role and three are independent directors. Mr. Shahzada Ellahi Shaikh is the Chairman of board. The management team is headed by the CEO Mr. Raza Ellahi who is well-versed in the textile business providing requisite acumen. He is supported by a team of seasoned professionals, supplementing his expertise.

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.