PACRA Maintains the Entity Ratings of Nisar Spinning Mills (Pvt.) Limited

The Nisar Spinning Mills (Pvt.) Limited (“the Company” or “NSMPL”) rating emanates from the adequate profile of the Company in the spinning industry of Pakistan. ATS Synthetic (Pvt.) Limited is the flagship company of the ATS group, which has a forte in diverse segments like Chemicals, Plastics, Metals, Spinning, and Synthetic Leather. Three companies primarily operate under the umbrella of the ATS Group: ATS Synthetic (Pvt.) Ltd, Nimir Chemical Pakistan, and NSMPL. The Company produces a variety of yarns, with Siro yarn being their prime selling product, followed by PVC yarn and CVC yarn. The Company's revenue is primarily driven by local sales, with exports accounting for ~23% of the total revenue base. In 9MFY24, the revenue base demonstrated impressive growth amounting to PKR ~11.6bln (FY23: PKR 9.8bln, 9MFY23: PKR 5.7bln) attributed to volumetric growth and inflationary impact on product pricing coupled with strategic gain on cotton trading. The surge in local raw cotton prices and the hike in energy tariffs resulted in the dilution of the Company’s margins and profitability matrix. To mitigate energy cost risks, the Company has installed a 3.5MW solar power project in the first phase, and in the second phase, another 4.2MW solar power plant will be installed. The Company's mid-term strategy focuses on expanding footprints in the weaving and Autocoro expansion (producing yarn from waste) segment to augment business sustainability. The management of the Company is mindful to keep aligning their performance with financial projections. The financial risk profile of the Company is considered adequate with a stretched working capital cycle that depicts the industry norm. The Company truncates short-term borrowings by availing advance payment facility from the group company to fuel its working capital requirements and reduce gearing over time. The Company maintains a leveraged capital structure with adequate coverages and cash flows. The size of the textile industry in Pakistan is estimated to be PKR 2.62Trn, ~3.0% of the total GDP as of FY23. The composite and garment segment in the textile sector has a contribution of ~PKR 1.6Trn, mainly dominated by knitwear, readymade garments, bedwear, and towels, followed by PKR 775bln from spinning and PKR 637bln from weaving. The escalation in energy tariffs and finance costs, PKR devaluation, and ensuring the availability of optimum quality raw materials are prime challenges.
The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative. The alignment of the Company's performance with its financial projections remains vital for the ratings.

About the Entity
NSMPL was incorporated on June 14, 2005, under the Companies Ordinance, 1984 as a (Pvt) Ltd Company. Nisar Spinning Mills (Pvt.) Limited is exclusively owned by the sponsoring family (~100%) where, the ownership of the Company resides with Mr. Anjum Nisar (~81.89%) and Mr. Tariq Nisar (~18.10%). The board consists of two members: Mr. Anjum Nisar (CEO & Group chairman) and Mr. Tariq Nisar-Executive Director. The company operates two spinning units with an installed capacity of 52,800 spindles and also engages in the production of non-woven fabric, with two plants having an installed capacity of 15 MT/day.