Lahore, The Pakistan Credit Rating Agency Limited (PACRA) has reaffirmed the entity ratings of Reliance Cotton Spinning Mills Limited at 'A-' for the long term and 'A2' for the short term, maintaining a stable outlook. This decision reflects the company's consistent performance and the strong backing of the Sapphire Group, despite the spinning industry's broader financial pressures.

According to The Pakistan Credit Rating Agency Limited, Pakistan’s spinning sector, with approximately 368 units and an installed capacity of around 13.4 million spindles, faces heightened challenges, including increased raw material costs and rising energy tariffs. However, improved local cotton production in FY24 is expected to ease some pressures through import substitution, despite an overall tight liquidity scenario.

Reliance Cotton Spinning Mills, a notable player within this landscape, boasts a significant capacity of approximately 57,600 spindles, producing a wide range of yarn products. With exports accounting for the majority of its revenue, the company serves markets in Italy, Portugal, Argentina, and Bangladesh, as well as maintaining a strong local customer base.

Financially, Reliance Cotton has demonstrated stability in revenue and profits, albeit with lean margins. The company's financial structure is deemed adequate, supported by manageable leveraging and a robust capital structure, attributed to its association with the Sapphire Group.

PACRA emphasizes the importance of Reliance Cotton’s operational efficiency and the ability to sustain margins in a competitive environment. Future ratings will hinge on the company’s capacity utilization and the enhancement of its business risk profile amid the sector’s economic headwinds.