PACRA Maintains Entity Ratings of Mahmood Textile Mills Limited

The ratings reflect the 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 has enhanced the spinning segment with the addition of 35,000 - 50,000 spindles and established a new apparel unit with a capacity of 35,000 product units/day. The top line 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 reflected decline over last nine months. Consequently, the Company reported a bottom line of PKR 127mln in 9MFY23 (1HFY22: 1,825mln). Overall, the financial matrix remains stretched given the highly leveraged capital structure and limited borrowing capacity. Coverages witnessed deterioration on account of a decline in free cashflows. The working capital cycle increased considerably driven by higher 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 provide comfort to the ratings of the Company. The companies that fall under the umbrella of Mahmood group are Masood Spinning Mills ltd, MG Apparel, MG Agri Foods (Pvt.) Ltd, and Roomi Enterprises (Pvt.) Ltd.
Textile exports in 9MFY23 were valued at $10.08bln, an 8% YoY decline. Lower demand, high cotton prices, and weak yarn demand contributed to the export decrease. Bedwear saw the largest decline of 19%, while knitwear dropped by 10%. Cotton yarn experienced a significant decline of 35%. Demand is expected to improve post-Jun-23 despite inflationary pressures.
The ratings draw comfort from the Company’s ability to prudently manage the working capital cycle, sustaining margins and generating sustainable cash flows from core operations, accompanied by decent financial performance and expansion plans.
The ratings draw comfort from the Company’s ability to prudently manage the working capital cycle, sustaining margins and generating sustainable cash flows from core operations, accompanied by 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.