Nishat Groups liquidity to improve amid Circular Debt Payments

January 7, 2021

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As per the recent developments, the government has planned to resolve circular debt issues by paying Rs 450 billion of receivables in three phases. The resolution of Circular Debt will not only ease off the liquidity position of the Independent Power Producers (IPPs) but will also lead to an increase in dividend payouts to shareholders.

As per the report issued by Arif Habib Limited, Nishat Chunian Limited (NCL) and Nishat Mills Limited (NML) are going to be major beneficiaries with the payment of overdue receivables of IPPs.

Nishat Mills Ltd has significant shareholding in three IPPs namely Nishat Power Limited (51%), Pakgen Power Limited (27.6%), and Lalpir Power Limited (28.8%). As per the report, net receivables per share of these IPPs stand at Rs 13.2 billion, Rs 12.19 billion, and Rs 6.89 billion, leading to net per share of Rs 37.32, Rs 32.78, and Rs 18.14 respectively.

If the mentioned IPPs actually receive the entire receivable amount, it may lead to dividend income for NML.

The report further estimated the impact of payouts on NML’s earnings by stating that if 100% payout is assumed, this will increase NML’s earnings by Rs 31.79 per share, while, 75% and 50% payout will aid profitability by Rs 23.85 per share and Rs 15.9 per share respectively. Whereas, 25% of payout will cushion the bottom-line by Rs 7.95 per share.

Likewise, Nishat Chunain Limited (NCL) has a significant holding in Nishat Chunian Power Limited (NCPL) whose net receivable position stands at Rs 9.489 billion, translating into a net per share of Rs 25.83.

The report states that with full dividend payout of receivable amount, the earnings of NCL may go up by Rs 18.64 per share.

It is highly likely, that Nishat’s IPP will be paying out the recieved amount as Dividend payout of these IPPs has drastically declined over last couple of years. Moreover, with increased funding requirement of the group as it is venturing in other businesses including Auto, Minning, the groups overall dividend payout is likely to remain higher.