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The Pakistan Credit Rating Agency Limited

Date
30-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 Nishat Mills
 Rating Type Entity
Current
(30-Jun-2017)
Previous
(27-Sep-2016)
 Action Maintain Maintain
 Long Term AA AA
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect the diversity of Nishat Mills' (NML) underlying businesses, along with a conservative capital structure. This emanates from its implicit holdco structure within Nishat Group (NG). This helps in managing the impact of adversities in any industry, particularly textile business, on the overall profile of NML. NML's significant as well as diverse strategic investment portfolio is generating a regular and growing dividend stream in addition to a potential of capital appreciation.

NML has an established business profile in textile industry. The company continues to maintain its position as a sizeable, export-oriented composite unit in the country's textile sector. NML has adequate diversification levels, in terms of both geography and customer base. The ongoing year has seen relatively subdued operational performance relative to last year on the back of industry-wide margin squeeze. The management intends to focus on enhancing existing facilities in order to achieve overall cost efficiencies.

The ratings continue to depend on the management's ability to maintain its business profile while sustaining its market position. Sustenance of business margins at a reasonable level remains important. Moreover, a formal holding company structure to monitor a large investment portfolio would bring structural efficiencies with focused decision making.
About the Entity
NML, established in 1951, is the largest textile composite unit and a leading exporter of textile products in the country. The company is majority (~52%) owned by Mansha family members and group companies. NML also acts as key participant in multiple strategic investments of Nishat Group (NG). NG - a leading conglomerate - maintains substantial presence in the country's financial sector, and strong foothold in textile, cement, and power sectors. Lately, the group has expanded its presence in the hospitality sector with the start of operations of Nishat Emporium mall. Also, partnering with local and international entities, the group has announced to enter Pakistan’s automobile assembly industry.

NML has a seven-member board of directors; two, including the CEO, represent sponsoring family, four are working for NG companies (including one NML's executive), and one is an independent member. The CEO, Mr. Umer Mansha, has been associated with NML since 1994 and carries extensive experience in textile industry. He is supported by an experienced management team. Moreover, the quality of systems and processes in place is considered good.
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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