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The Pakistan Credit Rating Agency Limited

Date
28-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Aman Zafar
aman.zafar@pacra.com

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

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Textile (Oct 17) [View]
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PACRA Assigns Initial Entity Ratings of Ellcot Spinning Mills Limited
 Rating Type Entity
Current
(28-Dec-2017)
 Action Initial
 Long Term A-
 Short Term A2
 Outlook Stable
 Rating Watch -

The ratings reflect Ellcot Spinning Mills Limited adequately maintained business profile despite suppressed domestic textile sector fundamental. The company’s revenues have taken hit in past few years mainly due to price decline in exports and local segments. Recently, revenues have started to pick up, benefiting from local volumes. Textile industry in general and spinning industry in particular continues to suffer from low international commodity prices and high cost of doing business in Pakistan. Consequently, performance volatility, featured by cotton price fluctuations, is considered high on standalone basis. Moreover, the announced export package by the state and its materialization would benefit the company. The company has built a sizeable investment portfolio enhancing the exposure to market risk. However, comfort can be drawn from conservatively need blue chip stocks. The management plan to find its BMR actively through additional borrowing and restricted operating cash flows impacts the financial risk profile, that remains stretched. The designed repayment pattern provides carefully support. However the assigned rating drive comfort from the company’s liquid investment, ability to manage financial risk, and association with Nagina Group.

The rating is dependent on the company's ability to match cash flows in case it plans to accumulate more debt in future
About the Entity
Ellcot Spinning Mills Limited (Ellcot) was incorporated in 1991 as a public limited company. Ellcot has a spinning unit engaged in the production and sale of yarn. The company is listed on Pakistan Stock Exchange. The company presently operates with 61,728 installed spindles with all spindles operating in full capacity. Ellcot is majority (~71%) owned by Nagina Group (NG), through group companies and sponsoring individuals

Ellcot's board comprises seven members out of which six are non-executive and one occupies an executive role - the CEO. In Sep16, after the demise of Mr. Shaikh Enam Ellahi, his elder son, Mr. Shahzada Ellahi Shaikh, assumed the role of Chairman. Five directors are NG nominees (sponsor family individuals), while two directors are independent.
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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