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The Pakistan Credit Rating Agency Limited

Date
16-Jun-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Haider Imran
haider.imran@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]

Related Research

  • Sector Study | Textile (Sep 16) [View]
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PACRA Maintains Entity Ratings of Prosperity Weaving Mills
 Rating Type Entity
Current
(16-Jun-2017)
Previous
(29-Dec-2016)
 Action Maintain Maintain
 Long Term A- A-
 Short Term A2 A2
 Outlook Negative Negative
 Rating Watch - -

The ratings reflect Prosperity Weaving's adequately maintained business profile despite suppressed domestic textile sector fundamentals. The company’s revenues have taken hit in recent years mainly due to price decline both in exports and local segments. Lately, revenues have started to pick up, benefitting from local volumes. Recent proposal to tax imported fabric should help margins. Meanwhile, support from core business margins is dependent upon efficiency gains via technology upgrades as well as yarn and energy prices in the country. Prosperity Weaving intends to gradually build a sizable investment portfolio; though conservatively investing in blue chip stocks, market risk remains. Financial risk remains stretched owing to (i) additional debt for regular BMR, and (ii) restricted operating cash flows impacting the company's debt-servicing ability, in turn, coverages. However, the assigned ratings derive comfort from the company's liquid investments, ability to manage financial risk, and its association with Nagina Group.

The ratings may be impacted in case pressure develops on financial profile due to further accumulation of debt without build up of matching cash flows.
About the Entity
Prosperity Weaving Mills Limited (Prosperity Weaving), incorporated in November 1991, is primarily engaged in production of home furnishing greige fabric. The company presently operates with 324 air-jet looms. The company is listed on Pakistan Stock Exchange. Prosperity Weaving is majority owned by Nagina Group (83%), through key sponsoring individuals and group companies.

Prosperity Weaving's board of directors, comprising nine members including Chief Executive Officer (CEO), is dominated by the sponsoring family. The ongoing year has seen changes in top leadership. After the demise of Mr. Shaikh Enam Ellahi, his elder son, Mr. Shahzada Ellahi Shaikh, assumed the role of Chairman. Later, Mr. Raza Ellahi Shaikh was elected as CEO. Previously serving as Director Marketing, he has 9 years of experience. He is supported by an experienced management team.
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.
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