Nisar Spinning Mills Faces Revenue Decline Amid Domestic Challenges

Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has affirmed the entity ratings of Nisar Spinning Mills (Pvt.) Limited (NSMPL), citing the company’s diverse business operations and established market presence. Despite this, the company’s revenue has faced a downturn, primarily due to decreased domestic demand and increased competition from yarn imports.

NSMPL, known for producing various yarns such as Siro, PVC, and CVC, has seen its topline fall to PKR 10.35 billion during the first nine months of fiscal year 2025, compared to PKR 14.96 billion in the previous fiscal year. The decline is largely attributed to increased yarn imports under the EFS scheme, which have constrained market liquidity, coupled with a dip in global cotton prices affecting yarn pricing.

The company recorded a net loss of PKR 337 million for the nine-month period of fiscal year 2025. Contributing to this financial strain are rising energy tariffs, which have compressed gross margins to 3.2%, down from 7.3% in the same period last year.

To address these challenges, NSMPL is banking on a recent policy rate reduction and its renewable energy initiatives, including the installation of an 8.5MW solar power plant, to cushion its cost structure. Additionally, a new 18.0% GST on imported yarn is expected to bolster the domestic spinning industry by encouraging local procurement.

NSMPL’s medium-term strategy involves expanding into the weaving and knitting sectors to enhance business sustainability and integrate its value chain. The company’s financial risk profile is considered adequate, with a stretched working capital cycle typical of the industry. A sponsor’s loan of PKR 2.2 billion provides liquidity support to meet working capital needs.

The textile industry faces challenges such as global demand shifts, price competitiveness, high energy tariffs, reliance on imported cotton, and potential tariffs on exports to the United States. Maintaining revenue growth, profitability, and efficient working capital management are crucial for the company’s ratings, according to PACRA.