PACRA Maintains the Entity Ratings of Masood Spinning Mills Limited

The ratings of Masood Spinning Mills Limited (“MSML” or “the Company”) reflect its adequate positioning in the spinning industry of Pakistan. The assigned ratings take comfort from the Company’s association with the Mahmood Group - the sponsoring group. It emerges from an appreciable presence of the Mahmood Group in multiple business segments and is considered one of the prominent textile conglomerates in the country. The principal activity of the Company is the manufacturing and sale of yarn, cotton seed and cotton lint with a yarn count ranging from 20s to 80s and an operational capacity of 101,664 spindles. The Company has a family-dominated board and the sponsors have an executive role. The Company's management has industry-specific experience, and its organizational structure demonstrates adequate delegation of authority matrix. The Company aims to grow by sustaining its core business, diversifying into new business segments with attractive margins, and implementing good governance for the organization's long-term sustainability. This is evident from the commercialization of its new sock unit with 322 knitting machines, which is now fully operational, as a part of its business diversification strategy to broaden its product offerings in the international market for better product margins and favorable product pricing. As per MSML management presentation, the socks unit is operating at a 98.0% capacity utilization rate as of January 2024 and expects a substantial contribution to its revenue from this unit by the end of FY25. This project is mainly funded through long-term conventional borrowings. The Company’s topline demonstrated a decrease (1HFY25: PKR 15.3bln; 1HFY24: PKR 18.6bln). This was driven by a strategic shift to capitalize on the rising demand for coarse yarn, supported by favorable product pricing dynamics, while maintaining stable sales volumes despite seasonal fluctuations. The management is cognizant of energy cost risk and optimized its overall cost structure with the installation of an ~11 megawatt solar which is operational. This has benefitted the Company’s bottom line and secured a net profitability of PKR 107.3mln (1HFY24: PKR 207.1mln). The financial risk profile of the Company is considered adequate with a slightly stretched working capital cycle depicting the industry norm. The working capital requirements of the Company are primarily met through short-term borrowings with adequate cash flows and coverages. The Company maintained a leverage capital structure. The management of the Company is mindful to keep aligning their financial performance with financial projections.
The ratings are dependent upon sustainable growth in the top line while maintaining the profitability matrix at an optimal level. The generation of sufficient cashflows and ameliorated coverages remains critical. The adherence to debt matrix at an adequate level is a prerequisite for assigned ratings.

About the Entity
Masood Spinning Mills Limited is a business venture of the Mahmood Group, established in 1935 by entering the tannery business. Now, the group has a presence in the complete cotton chain, tanneries, real estate, and food. Cumulatively, the group operates ~222,384 spindles and ~196 looms. The Group sponsors cumulatively own 100% shareholding directly and through associated companies. Overall control of the board vest with seven BODs. Mr. Khawaja Muhammad Ilyas is the CEO of the Company and has over four decades of experience. He is supported by a team of seasoned professionals.