Spinning Sector Overview
SPINNING | FINANCIAL RISK
PACRA
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Overall, the spinning sector is moderately leveraged with average sector's borrowings standing at ~50% of total capital.
Total borrowings of the spinning sector stood at PKR ~439bln as at 30th July 2020. Around 12% of the total borrowings are on SBP's
subsidized rates.
PKR ~53bln of LTFF financing at end-July 20;
Most of the borrowings (~65%) constitute short-term borrowings utilized to finance the working capital requirements. Spinning sector does
not qualify for EFS or other short-term subsidized borrowing schemes.
Total banking advances to the textile cluster is PKR ~1.2tln as at end-June 20 with infection ratio of 14.7% (~10% for overall corporate
advances).
Spinning sector has greater proportion of short-term borrowings in overall financing mix with these funds borrowed at normal rates sa it
does not qualify for subsidized rates due to lower value addition. Hence, the financial risk of the sector is relatively high.
SBP's rate cut of 625bps since March 20 is expected to reduce finance cost by PKR ~24bln for the sector.
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Source: SBP, PACRA DatabaseView entire presentation