PACRA Assigns Initial Entity Ratings to Masood Textile Mills Limited

The assigned rating of Masood Textile Mills Limited (“the Company” or “MTM”) reflects the strapping profile of the Company in the textile industry of Pakistan. MTM is a full vertically integrated textile unit with high-end quality standards of manufacturing facility & production processes which primarily include Spinning, Knitting, Yarn and fabrics Dyeing, Laundry, Printing, Embroidery and Apparel Manufacturing. MTM preserve a unique sense of craftsmanship in creating, developing, and manufacturing knitted apparel products, from basic to highly fashioned garments designed for everyday life. The business strength of MTM lies in the customized production of high-value-added garments in multitudinous grade-wise product categories. At MTM, product innovation and quality assurance are a key to success. The business sustainability takes comfort from the MTM's long-term association with well-established and stable international brands/entities as their top clientage, including key players like JCPenny, Polo Ralph Lauren, Hugo Boss, Zara, Marks & spencer, Adidas, Amazon, Shoeby, Tom Tailor, KIK Textilien, Sears, DC Shoes, etc. The company's top line has shown an annual growth rate of 11% and stood at PKR 60.1bln as of FY23 (FY22: PKR 54.1bln; 9MFY24: PKR 44.3bln). The growth is supplemented by the price impact of the export segment as volumetric sales decline mainly on the back of the global recession and consumption pattern trend. The Company gradually expects to induce incremental growth in dollar terms up to USD 100mln. The gross margins of the Company in 9MFY24 have shown improvement depicting the capacity of price transferability, however, the surge in operating expenses and magnifying finance cost has impacted the net margins. The Company is in the process of executing CAPEX for the installation of a solar power plant of ~12 megawatts in two phases and a biomass power generation project to manage escalating energy costs. The board of the Company is more of an advisory nature as all members are well-reputed and experienced professionals. The management of the Company consists of seasoned professionals with adequate delegation of authority matrix. The financial risk profile is considered adequate with stretched working capital management. The Company's working capital requirements are primarily met through short-term borrowings (STB) as it is a highly intensive working capital business. The Company is expected to inject further capital of PKR 2bln via the right issue of PKR 4bln. The Company has maintained a leveraged capital structure, however, over the years the leveraging of the Company has reduced. The coverages of MTM are considered moderate with stable cashflows.
The ratings are dependent upon a stable profitability matrix while expanding business volumes. The efficient management of inflated finance cost risk while fueling growth through STB remains critical. Adherence to the debt matrix while generating sufficient cashflows and maintaining coverages at an optimal level is a prerequisite for assigned ratings.

About the Entity
Masood Textile Mills Limited is a public listed company incorporated in 1984. Ms. Nazia Nazir w/o Mr. Shahid Nazir Ahmad has an ownership stake of ~ 30.16%, Chinese investors cumulatively hold a 37.09% stake and the remaining shareholding mainly vests with National Bank (6.7%), NIT and ICP (3.29%) & general public (~9% ). MTM board comprises seven members including the CEO Mr. Shahid Nazir Ahmad, the Chairman of the board Mr. Naseer Ahmad Shah, two independent directors, two nominee directors from Shanghai Textile Company Limited and one from NIT.