PACRA Maintains the Entity Ratings of Mahmood Textile Mills Limited

The ratings reflect the presence of (“Mahmood Textile” or “the Company”) in the competitive textile landscape. This stems from its long history of operations as an export-based Company in the textile value chain along with a large strategic portfolio on a standalone basis. It is the flagship Company of the “Mahmood Group”. The Group enjoys multiple revenue streams with a large business profile optimally parked in diverse sectors of the economy. In segment-wise business contribution, the Spinning segment is the foremost segment followed by Weaving segment and Apparel segment. The product slate of the Company divests into Yarn, Grey Cloth, and Garments. The Company’s topline is dominated by export sales indicating a notable growth during the last three years. During 9MFY24, the Company secured a topline of PKR 52.4bln (FY23: PKR 54.6bln). The latest expansions in the Spinning and Apparel segment exacerbated the revenues in terms of volume. The Company enjoys a stable clientele around the globe. The prime export destinations of the Company are China, Bangladesh, Turkey, Hong Kong, Germany, and United States. The sales mix remained the same despite macroeconomic and industry-specific challenges. The Company’s margins dipped minutely due to expensive raw material procurement and elevated energy costs. The dividend income has created a buffer in the bottom line. The Company’s reliance on STBs has magnified the finance cost. This has largely diluted the profitability matrix of the Company (9MFY24: PKR 177mln; FY23: PKR 1.2bln). The improvement in the bottom line is significant to sustain the ratings. The management has commissioned the Solar project of 11 Mega Watt and has further planned the installation of a steam turbine to curtail risk associated with elevated energy costs. The Company's financial risk profile is considered adequate with stretched working capital management depicting the industry norm. The Company's working capital requirements are primarily met through short-term borrowings (STB). The cash flows and coverages of the Company are considered adequate. The Company has maintained a leveraged capital structure. The Company is in the process of debt reprofiling, to create a cushion in their cashflows. The size of the textile industry in Pakistan is estimated to be PKR 2.62Trn ~3.0% of the total GDP as of FY23. The composite & garment segment in the textile sector has a contribution of ~ PKR 1.6Trn mainly dominated by knitwear, readymade garments, bedwear, and towels followed by PKR 775bln from spinning and PKR 637bln from weaving. The escalation in energy tariffs & finance costs, PKR devaluation, and ensuring the availability of optimum quality raw materials are prime challenges specific to the industry to assess the international market and stay price-wise competitive.
The ratings are dependent upon the Company’s ability to sustain business growth while generating sufficient cashflows and maintaining the profitability matrix at an optimal level. The sustainability of margins and improvement in coverages while expanding business volumes remains critical.

About the Entity
Mahmood Textile Mills Limited, incorporated in 1970, is a family-owned business primarily engaged in the production and sale of Yarn, Grey cloth, and Garments. The Company is operating with a capacity of ~150,768 spindles and ~228 looms. It is listed on the Pakistan Stock Exchange. Mahmood Group – sponsor – cumulatively holds over ~92% stake via Individuals and Group companies. Overall control of the board vests with seven members. The CEO, Mr. Khawaja M. Younus is supported by a team of seasoned professionals.