Mughal Iron & Steel Industries Limited (“MISIL” or “the Company”) was incorporated in Pakistan as a public limited company on February 16, 2010, and was listed on the Pakistan Stock Exchange in March 2015 under the Engineering sector. The Company operates through ferrous and non-ferrous segments, with the ferrous segment serving as the core business, contributing the majority of revenues. Its diversified product portfolio includes billets, girders, T-Iron, rebars, and other steel products, catering to housing, industrial, and infrastructure sectors. The non-ferrous segment, primarily comprising copper and aluminum ingots, is smaller in scale and has historically supported profitability through exports—particularly to China—thereby diversifying revenue streams beyond the domestic market.

The Sponsor family maintains a controlling stake of approximately 75.3% in the Company, with the remaining shareholding distributed among financial institutions and the general public. As of June 30, 2025, shareholding was concentrated with Directors/CEO & family (43.20%), Associated Companies/related parties (32.16%), Banks/DFIs/NBFIs (5.16%), and the General Public (7.91%). On June 17, 2025, the Company issued 33,062,447 Ordinary Class-C shares through a rights issue, further expanding its share capital.

The newly elected Board, appointed in October 2025 for a term of three years, comprises seven members. Five directors, including the Chairman, Mr. Mirza Javed Iqbal, MR Jamshed Iqbal and the CEO, represent the sponsoring family, while the remaining two serve as independent directors. The Board collectively possesses the requisite skills, experience, and industry knowledge necessary to ensure effective oversight and strategic direction. Mr. Javed Iqbal brings nearly four decades of extensive experience in the local steel industry. The presence of independent directors, Mr. Shoaib Ahmed Khan and Mr. Muhammad Alam Bhatti, further strengthens the Company’s governance framework by enhancing objectivity and balanced decision-making. The Company has constituted three Board committees: (i) Audit Committee, (ii) HR & Remuneration Committee, and (iii) Environment, Social and Governance (ESG) Committee. Each committee includes an independent director in compliance with the SECP Code of Corporate Governance. Overall Board attendance during the year has remained satisfactory. The inclusion of independent directors reinforces governance standards by ensuring impartial oversight and safeguarding the interests of all stakeholders. Moreover, the presence of a female director contributes to Board diversity and aligns with best corporate governance practices. The Company’s external auditors, M/s. Fazal Mahmood & Co. and M/s. Muniff Ziauddin & Co., have expressed an unqualified opinion on the financial statements for the year ended June 30, 2025. The same firms have been reappointed as external auditors for FY26.

The Company maintains a streamlined organizational structure characterized by clearly defined roles, functional segregation, and appropriate delegation of authority. The organogram is structured primarily around the CFO and COO functions, with respective departments reporting accordingly, while the Executive Directors and the CEO report directly to the Board. This structure facilitates efficient decision-making and supports operational effectiveness. Mr. Khurram Javed, CEO, possesses over a decade of professional experience and holds an MBA from Coventry University. He has played a pivotal role in strengthening the Company’s human resource base by inducting qualified professionals across diverse functional areas. In addition to his role in the Company, he also serves as CEO of other group entities, including Mughal Energy Limited. He is supported by a competent and experienced management team. The senior management team includes Mr. Shakeel Ahmad, Chief Operating Officer, who brings extensive experience in strategic market positioning, sales expansion, and brand development. The Chief Financial Officer, Mr. Muhammad Zafar Iqbal, is a Fellow Member of ICAP with strong expertise in finance, taxation, and strategic planning.

During FY25, Pakistan’s long steel (rebar) sector demonstrated resilience despite a medium-to-high business risk profile, driven by cyclicality, reliance on imported scrap, and elevated energy costs. Gradual stabilization in macroeconomic factors, including moderating inflation and relative exchange rate stability, supported a recovery in construction activity, providing renewed demand momentum for steel. Given the sector’s direct linkage with construction, this recovery is expected to drive higher volumetric demand, improved capacity utilization, and a more favorable operating environment in the near term. While the positive trend has continued into FY26, overall recovery remains gradual compared with other construction-related industries, as elevated power tariffs and ongoing regulatory adjustments continue to weigh on margins. The copper segment also faced headwinds from global trade disruptions, including renewed U.S.–China tariff tensions, and domestic regulatory changes affecting scrap availability. Adjustments in the Export Facilitation Scheme (EFS) also influenced copper export flows. In line with the anticipated industry dynamics, Mughal’s demand outlook for FY26 and beyond remains positive. During 1HFY25, overall volumes in the ferrous segment declined by 18%, primarily due to the temporary impact of a severe and prolonged monsoon spell, which disrupted construction activity and sales. In contrast, the non-ferrous segment recorded a notable increase of 34%in volumes, largely driven by higher export sales. This increase was mainly attributable to the clearance of pending inventory and execution of orders in the pipeline following earlier operational and regulatory disruptions that had curtailed non-ferrous operations. Despite the reduction in ferrous volumes, overall margins improved, supported by stronger performance in the non-ferrous segment and a decline in finance costs, leading to an increase in net profitability.  Going forward, considering the volatility in non-ferrous prices and related operational uncertainties, management’s strategic focus and future projections are increasingly centered on the ferrous segment. Gross margins in the ferrous business are projected to sustain and potentially improve, particularly with the substantial completion of the coal-fired power plant under Mughal Energy. The plant is expected to provide electricity at more competitive rates, thereby reducing energy costs and supporting margin.

During 1HFY26, Mughal’s net working capital cycle remained stable at 110 days, consistent with FY25. Inventory days improved to 59 days (FY25: 72 days; FY24: 86 days), reflecting the sale of copper inventory in line with the strategic scaling back of non-ferrous operations. Receivable days increased to 72 (FY25: 53; FY24: 40), primarily driven by ferrous sales and increased quarter-end dispatches, while payable days rose modestly to 21 (FY25: 16; FY24: 8). Overall working capital movements were influenced by expanded ferrous activity and the strategic reduction in export-oriented non-ferrous operations. The Company meets its working capital requirements through a mix of internal cash generation, Sukuk placements, and short-term bank borrowings. As of end-September 2025, short-term borrowings stood at PKR 26bln (FY25: PKR 22bln; FY24: PKR 25bln). Free cash flows from operations (FCFOs) amounted to PKR 2.7bln in 1HFY26, compared to PKR 5.6bln in FY25 and PKR 5.9bln in FY24. Leverage remained moderate at 51%.To establish a permanent working capital line and avoid reliance on the rollover of short-term instruments, the Company plans to raise a total of PKR 5bln, comprising PKR 2.5bln through the issuance of a Term Finance Certificate (TFC) and PKR 2.5bln through Sukuk, expected to be subscribed by financial institutions/DFIs and mutual funds. These instruments will replace existing short-term borrowings, providing longer-term structural stability to the working capital cycle. Additionally existing facilities are expected to be optimized to create sufficient cushion, ensuring that the new issuance does not materially increase overall borrowings. Management intends to maintain leverage at approximately 55% during the TFC’s tenure and not exceed this level.  With respect to the proposed instrument, PACRA has evaluated the underlying financial projections supporting the issuance and expects volumetric growth, gross margins, and the associated leveraging trajectory to remain broadly aligned with stated assumptions, without material deviation. The projected cash flow profile, together with the structured DPA and FSRA mechanisms established for the instrument’s servicing and repayment, enhances visibility over timely debt settlement. Overall, the anticipated profitability and embedded structural safeguards support stable cash flow generation over the tenor of the TFC and underpin a stronger credit profile for the instrument relative to the entity’s standalone rating.

Mughal is in the process of raising funds of PKR 2.5bln, from a rated, secured, syndicated Term Financing arrangement “Mughal Iron & Steel Industries Limited – Syndicated TFC - PKR 2.50bln - TBI”, including a Green Shoe Option of PKR 500mln. The tenor of the facility will be of three years. The funds will be utilized to finance or refinance the Company’s permanent working capital requirements. The TFC will carry a tentative profit rate of 3MK + 190 bps, with principal repaid in 11 equal quarterly installments starting six months from the first drawdown.

Security for the instrument will be provided through a joint pari passu (JPP) charge on the Company’s present and future fixed assets, excluding land and buildings, with a margin of 25%. The instrument will also be supported by personal guarantees from the Company’s sponsor directors. The initial disbursement will be made on a ranking charge, which will be upgraded to pari passu status within 120 days of the first disbursement.

In addition to the underlying security, timely payment under the instrument is further safeguarded through an additional layer of enhancement via:

Facility Service Reserve Account (FSRA):  10% of the issue will be maintained in an interest-bearing FSRA throughout the tenor of the TFC, providing a dedicated liquidity buffer.

Debt Payment Account (DPA): One-third (1/3rd) of the upcoming profit & or principal payment (the “Next Instalment”) shall be deposited into the DPA not later than the 25th date of each month so that the balance available in the DPA on each Payment Date is equivalent to the amount of instalment due on that Payment Date.