The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Upgrades Entity Ratings of Masood Spinning Mills Limited

Rating Type Entity
(03-Mar-22 )
(07-Apr-21 )
Action Upgrade Maintain
Long Term A- BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

Masood Spinning Mills Limited (‘Masood Spinning’ or ‘The Company’) is a public unlisted limited company. The Company is part of Mahmood Group, one of the leading textile conglomerates in the country. The Company is engaged in manufacturing 0-40 count yarn (coarse yarn) and fine count yarn. With the capacity enhancement, the topline and margins in 1HFY22 have posted strong improvement and the management expects the topline growth to remain strong in FY22. The topline primarily consists of exports. The Company mainly exports to Europe and China, with China responsible for buying more quantities. The risk of geographic concentration in Europe is considered manageable, however, client-wise concentration has remained on the higher side. Locally, the Company mostly sells to large-sized and registered customers. The financial risk matrix is reflecting good coverage, stable working capital cycle, and high leveraging. Organic growth in the equity base is positive. Going forward, the planned BMR is expected to bring in efficiency gains and healthy margins.
During the period July-December FY21-22, textile exports of the country surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year. This is attributable to an increase in demand for textile products internationally and the channeling of export orders towards Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. Going forward, the textile sector’s outlook is expected to stay positive in the medium term where the demand for textile products is expected to sustain. In the local market, the textile sector has recorded strong performance.
The Company's association with Mahmood Group and vast experience of sponsors remain important rating factors. The ratings are dependent upon the management’s ability to improve margins, profitability, and financial profile of the Company. This includes keeping the debt levels manageable and improve the Company’s competitive position in the industry. Sponsor’s support and business acumen remain important for the ratings.

About the Entity
Masood Spinning is a venture of Mahmood Group, which was originally established in 1935, by entering the tannery business. Now the group has a presence in the complete cotton chain (growing to finished products), tanneries, real estate, and food. Cumulatively, the group operates ~225,000 spindles and ~196 looms, out of which 98,784 spindles come under Masood Spinning. Mahmood Group Sponsors cumulatively own 100% shareholding directly and through associated companies.

Overall control vest with eight board members, all of whom are from the sponsoring family. Mr. Khawaja Muhammad Younus is the CEO of the Company and has over four decades of experience in the textile industry. He is supported by a team of seasoned professionals who work under various sub-divisions to ensure efficiency.

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.