The Pakistan Credit Rating Agency Limited
Press Release


Sehar Fatima

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA assigns Preliminary Rating to Nishat Mills Limited | PPSTS | PKR 15bln | TBI

Rating Type Debt Instrument
(22-Sep-23 )
Action Preliminary
Long Term AA
Short Term A1+
Outlook Stable
Rating Watch -

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. During FY22, the Company’s top line was recorded as historically high attributable to a high demand pattern for textile products. Moreover, a factor of continuous BMR has assisted the Company in maintaining a leading position in the textile universe. The diverse and sizable investment portfolio, emanating from the Company's implicit Holdco status within the Group, generates a regular dividend stream, supporting core income recorded at PKR 3.3bln (FY21: PKR 2.7bln). The company has a moderately leveraged capital structure. The leveraging increased to 34.7% (FY21: 28%) attributable to an incline in short-term borrowings. The Company's association with Nishat Group as its flagship entity remains a key rating factor. During 9MFY23, the Company’s topline demonstrated a positive growth YoY. The short-term borrowings reflected an unprecedented increase due to the onslaught of macroeconomic challenges and unfavorable prices. The repercussions were reflected in the form of a hike in finance cost. Meanwhile, the Company continues to receive sizable dividend income from its diversified investment portfolio that provides comfort to the ratings. The company’s bottom line clocked at PKR 11.1bln which translated into improved margins. However, the management of coverage and working capital cycle remains essential. The Company is expected to maintain its strong financial profile, going forward.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Preserving low-leveraged capital structure and sound coverages remains imperative.

About the Entity
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 the Mansha family and Nishat Group companies. Nishat Mills also holds shareholding in multiple strategic investments of Nishat Group. 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. The CEO, Mr. Umer Mansha, has been associated with Nishat Mills since 1994 and carries extensive experience in the textile industry. He is supported by an experienced management team.

About the Instrument
The Company is in the process of issuing a rated, privately placed, unsecured, non-convertible shariah-compliant, short-term Sukuk or Islamic commercial paper, Nishat Mills Limited | PPSTS | PKR 15bln | TBI of PKR 25,000mln in Oct’23. The drawdown will be in two tranches; Sukuk 1 for PKR 15bln and Sukuk 2 for PKR 10bln. Tenor of the instrument will be 6 months. The purpose of the instrument is to be utilized to meet short-term Working capital funding requirements including the procurement of cotton. Profit payment and principal would be made in a bullet payment at the time of maturity.

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.