The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Mahmood Textile Mills Limited

Rating Type Entity
(25-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect improved business profile of Mahmood Textile Mills limited (‘Mahmood Textile’ or ‘The Company’) – the flagship entity of Mahmood Group. Business operations comprise a spinning segment and two weaving units. The Company plans to enhance the spinning segment with addition of 35,000 - 50,000 spindles and establishing a new apparel unit with capacity of 35,000 product units/day. Topline of the Company inclined sizably and the sales mix remained dominated by healthy exports. However, the Company is engaged in the exports of yarn and greige fabric. Hence, does not qualify for the export refinance facility. Margins of the Company witnessed substantial surge. Consequently, the Company reported bottom-line of PKR 1,825mln in 1HFY22 (1HFY21: 239mln). Overall, financial profile of the Company remains stretched given highly leveraged capital structure and limited borrowing capacity. However, coverages witnessed improvement on account of enhanced free cashflows. Working capital cycle reduced considerably driven by lower inventory days. The Company has a sizeable investment portfolio, which further upsurged. The portfolio is managed at the Group level. Although, the Company has invested in blue-chip stocks, high market risk exposes the Company to significant risks. The sponsor’s vast experience and the Company's association with Mahmood Group provides comfort to the ratings of the Company. During 9MFY22 (Jul21-Mar22), Pakistan textile exports surged to $14.2bln (recording growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth. However, month on month basis, textile exports have declined by 3.5%. Going forward, the textile sector’s outlook is expected to stay good in the medium term where demand for textile products is expected to sustain.
The ratings draw comfort from the Company’s ability to prudently manage the working capital cycle, sustaining margins and generating sustainable cashflows from core operations, accompanied with decent financial performance and expansion plans.

About the Entity
Mahmood Textile Mills Limited, incorporated in 1970, is a family-owned business primarily engaged in the production and sale of yarn and greige fabric. The Company operates with 126,824 spindles and 196 looms. It is listed on The Pakistan Stock Exchange. Mahmood Group – sponsor – cumulatively holds over 90% stake via individuals and Group companies. The Group has interests in textile, ginning, leather, food, real estate, and power sectors. Overall control of the Company vests with an eight-member BoD. Six board members belong to the sponsor family and two are independent directors. Management control also vests with Mahmood Group. Mr. Khawaja M. Iqbal – CEO – has more than four decades of textile experience. He is supported by a seasoned management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.