Press Release

JCR-VIS assigns Entity & TFC Ratings to Nishat Chunian Limited

Karachi, May 03, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned medium to long-term and short term entity ratings of ‘A’ (Single A) and A-2 (A two), respectively to Nishat Chunian Limited (NCL). JCR-VIS has also assigned preliminary medium to long term rating of A+ (Single A plus) to the proposed TFC issue of Rs 750 million of NCL. The outlook on the rating is ‘Stable’.

NCL, operating since 1990, falls amongst the largest textile units functioning in Pakistan. The company has a fully integrated processing unit and is operating primarily as an exporter of home textile products and yarn. In the backdrop of the cyclical nature of textile industry as a whole, the company has taken an initiative to diversify its business into energy sector which is expected to remain in demand over the foreseeable future.

Ratings also factor in NCL’s improving financial profile emanating from increasing margins and growth in sales. Gross margins are expected to improve further during FY10 on the back of cost rationalization through procurement of cotton mostly at the beginning of FY10 at considerably lower rates. During 1H10, sponsors injected equity through 50% rights issue at par. However, debt leverage remained around the previous level owing to debt procurement for investment in a subsidiary. The company plans to steadily improve its leveraged position through paying off its long-term debt with simultaneous expansion of its equity base.

The company is planning a TFC issue of PKR 750m having a tenor of 5 years, which will partly substitute its long-term debt and partly finance working capital requirements of its subsidiary. The preliminary TFC rating will be converted into final rating on review of the legal documents. Meanwhile, NCL has invested in Nishat (Chunian) Power Limited (NCPL), which is a 200 MW Independent Power Plant with current holding of around 57% in NCPL. Going forward, the company is planning nominal capital expenditure. Timely commencement of NCPL’s operations and the related income to NCL in the form of dividends would remain critical for healthy cash flows, in the medium-term.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (sabeen@jcrvis.com.pk) or Mr. Maimoon Rasheed (maimoon@jcrvis.com.pk) at 021-5311861 and 042-6610681-84 or fax to 021-5311873.


Faheem Ahmad
President & CEO

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