PACRA Maintains Debt Instrument Rating of Masood Textile Mills Limited- PP Sukuk- PKR 2bln- Sep’24

The rating of Masood Textile Mills Limited (‘the Company’ or ‘MTM’) underscores the Company’s prominent business profile in the value added textile products. MTM is a fully vertically integrated textile manufacturer, leveraging state-of-the-art production facilities and rigorous quality control standards that meet international customer requirements. Its operations span the entire textile value chain, including Spinning, Knitting, Yarn and Fabric Dyeing, Laundry, Printing, Embroidery, and Apparel Manufacturing. Its competitive edge lies in precision production, design innovation, and the ability to deliver high-quality garments across diverse product grades. Business stability is further reinforced by MTM’s long-standing partnerships with a well-diversified clientele of globally recognized and financially robust international brands. These include global industry leaders such as JCPenney, Quicksilver, Hugo Boss, Zara, Marks & Spencer, PVH, Footlocker, among others. MTM regained momentum as its previously disrupted supply chain stabilized, coupled with a gradual reduction in the policy rate, which eased cost pressures, resulting in a consolidated profit after tax (PAT) of PKR 661.7mln over the past two quarters. The Company’s financial risk profile is considered adequate, though characterized by stretched working capital management and a highly leveraged capital structure, driven by intensive working capital needs that are primarily financed through short-term borrowings. In March 2025, the Company made a sukuk profit payment of PKR 62.03mln. The next profit payment is scheduled for the end of June 2025, while principal redemption will commence in September 2025.
The efficient management of finance costs while fueling growth through STB remains critical. The rating of the instrument captures the strength of the security structure, primarily from the FPA mechanism.

About the Entity
Masood Textile Mills Limited is a public listed company incorporated in 1984. The board comprises seven members, including the CEO, Mr. Shahid Nazir Ahmad, the Chairman of the board, Mr. Naseer Ahmad Shah, two independent directors, two nominee directors from Shanghai Challenge Textile Co. Limited, and one from NIT

About the Instrument
Masood Textile Mills Limited (“MTM” or the “Issuer” or “the Company”) has issued a Rated, Privately Placed & Secured, Islamic Certificate ("Sukuk") of PKR 2,000mln in Sep-24 to finance the Company’s permanent working capital requirements. The Sukuk will be secured by way of a First Joint Pari Passu hypothecation charge over all present and future Fixed Assets (excluding land and building) of the Company present on the Specific Properties (excluding assets with specific charges in favour of a creditor) with 25% margin. The Company has established a Finance Payment Account (“FPA”) with the Bank prior to Facility Effective Date (“FED”), which is held under exclusive lien in favour of the Participating Institutions. During each quarterly period, the Company shall deposit an amount equivalent to the 1/3rd of the outstanding installment amounts each month into the FPA in such a way that the aggregate amount available in the FPA 10 days prior to the upcoming installment due date. The tenor of the instrument is 5 years, inclusive of a grace period of up to 9 months. Profit will be paid quarterly in arrears on the outstanding balance of the issue amount at the rate of 3MK+1.75%. Principal repayment will be paid in 17 equal quarterly installments till the maturity of the instrument in Sep-29