PACRA Maintains Entity Ratings of Maqbool Textile Mills Limited

The rating reflects the adequate presence of Maqbool Group in the textile and seed oil industry of Pakistan. The two Companies primarily operate under the umbrella of the Maqbool Group which includes (i) Mehmooda Maqbool Mills Limited and (ii) Maqbool Textile Mills Limited “the Company or (MTML)”. The principal activity of the Company is the manufacturing and sale of yarn with an average yarn count of 29s and an installed operational capacity of 82,224 spindles and 576 MVS spindles. The spinning industry is highly fragmented and consists of ~368 dedicated spinning units with an estimated size of PKR 775bln and 13.4mln number of spindles installed as of FY23 according to an economic survey of Pakistan. The projected cotton production estimate is revised and projected to be 11.5mln bales and currently, production reached up to ~8.26mln bales surpassing FY23 total production of 4.91mln bales. During FY24 better local raw cotton yield is expected to supplement the Companies for import substitution. Pakistan's requirement for imported cotton stands at 3.5 million bales to 4 million bales this year. The recent elevation of energy tariffs and the availability of locally procured raw cotton are the prime challenges specific to the industry. The Company product slate and revenue streams primarily divest into four categories which include CVC yarn, PC yarn, PV yarn and PP yarn. During FY23, the company's profitability matrix and fundamentals are under stress due to a dip in local and international yarn demand coupled with a hike in energy tariffs, PKR devaluation and an inflated policy rate. To manage energy cost risk, the Company is in the process of executing CAPEX for the installation of a solar power plant. During 3MFY24, the company witnessed a slight recovery in the bottom line owing to the growth in exploring export avenues and improvement in yarn demand pattern. The financial risk profile of the Company is considered adequate considering the leveraged capital structure and slightly stretched working capital management depicting industry norms. The cashflows and coverages of the Company are considered adequate and need improvement. The company’s performance will be observed in the upcoming quarters with a prime focus on converting operational efficiency into internally generated sufficient cashflows to supplement the core business operations. Furthermore, if the Company sustains and improves its performance in terms of topline and profitability and coalesces with the contribution in equity may result in appropriate action in ratings.
The ratings are dependent upon the Company’s ability to improve its performance in terms of business fundamentals sustainability and devise a strategy to manage inflated energy costs in future. The maintenance of capacity utilization at an optimal level while generating sufficient cashflows and coverages remains critical for the ratings. The adherence to the debt matrix at an adequate level is a prerequisite for the assigned rating.

About the Entity
Maqbool Textile Mills, incorporated in 1989, as a public listed Company. The company is primarily owned by the Maqbool family (75.20%) and others (24.8%). The board comprises ten members. Out of this, four directors are non-executive, three directors occupy executive roles, and three directors are independent. Seven board members represent the Maqbool family. Mr. Mian Tanvir Ahmed Sheikh, the CEO, carries with him extensive experience in the textile sector and is supported by an experienced management team