Lahore, April 01, 2019 (PPI-OT): The ratings reflect Ellcot Spinning Mills Limited’s (Ellcot) improving business profile. The Company largely caters to the needs of local market and it has developed a reputable clientele over the years. Textile industry in general and spinning industry in particular has suffered from low international commodity prices. Moreover, lower demand for cotton yarn from China owing to trade war with USA has suppressed the demand of yarn in local market.
However, the Company has managed improved business profile on the back of higher product quality and volumetric growth. Additionally, withdrawal of custom duty and sales tax on cotton imports, coupled with subsidized gas rates for textile industry will benefit the Company going forward. Leveraging of the Company has increased due to higher borrowing for working capital and CAPEX. Ellcot intends to gradually build a sizable investment portfolio.
This exposes the Company to market risk as exhibited by recent volatility in stock exchange. Any significant decline in investments leading to losses, and eventually equity erosion, will impact the financial profile of the Company. The management’s ability to manage this risk is critical. The assigned ratings derive comfort from Ellcot’s association with Nagina Group.
The ratings are dependent on the Company’s ability to uphold its financial profile, while strengthening business margins. The Company’s ability to generate cash flows to fulfill its financial obligations is critical for the ratings. At the same time, prudent management of investment portfolio is important.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com