PACRA Maintains Entity Ratings of KTM Leather Pvt. Limited

The ratings reflect the KTM Leather (Pvt.) Ltd’ (hereinafter referred to as ‘KTM’ or ‘the Company’) sustained presence in the tannery industry, with operations spanning more than nine decades since 1935. This continuity, now under the stewardship of the fourth generation, is supported by its role as a foundational part of Mahmood Group, a diversified industrial conglomerate. KTM is a leading manufacturer of premium leather products. The Company operates across the entire value chain, from rawhide processing to the production of finished leather, utilizing both cow and buffalo hides. KTM’s high-quality leathers are exported to nearly 56 countries, serving as essential materials in the production of bags, footwear, upholstery, belts, accessories, and other leather-based goods. The Company’s key export markets include China, Bangladesh, Singapore, Europe, and North America, where it continues to maintain a strong presence and long-term business relationships. Pakistan's leather industry is divided into five key segments, with leather gloves making up ~37%, followed by apparel and clothing at ~29%, and tanned leather at ~16%, together accounting for ~82%. The country possesses a significant potential within the footwear sector and can receive benefits from the U.S.-China trade war and the GSP status for Europe. In FY25, Pakistan’s leather exports declined by ~4.45% compared to FY24, with tanned leather volumes falling by nearly ~14%. The contraction was driven by weaker international demand, rising energy and production costs, and reduced competitiveness relative to regional exporters such as Bangladesh and Vietnam. Although livestock numbers have increased, hide and skin output has not kept pace, constrained by high meat prices, disease-related losses, and elevated processing costs. Broader industry challenges include outdated technology, shortages of skilled labor, and competition from lower-cost substitutes. Despite these constraints, opportunities remain through global population growth, evolving fashion trends, and favorable exchange rates, particularly by prioritizing value-added products. Margins depend on improving topline performance, and building a strong capital base is essential for future growth. KTM reported topline revenues of PKR 3,817mln in FY25, reflecting a modest year-over-year increase of ~1.2% compared to PKR 3,773mln in FY24, primarily driven by higher local sales. Export sales remained subdued, declining from PKR 3,452mln in FY24 to PKR 3,224mln in FY25, underscoring persistent challenges in international markets. Margins contracted across most levels; however, the net profit margin showed slight improvement, rising to 0.7% from negative 1.4% in FY24. This recovery was primarily driven by reduced borrowing costs during the review period. The financial risk profile of the Company is considered moderate with adequate coverages, cashflows, and working capital cycle. KTM’s capital structure is leveraged, encompassing short-term borrowings & modest equity.
The ratings are dependent on KTM’s ability to sustain its position amidst a conservative leather business environment and management’s ability for successful strategy execution pertaining to the manufacturing of high-fashion finished leather products. With the growth in KTM’s revenue, prudent financial performance and an effective liquidity profile shall remain imperative.

About the Entity
KTM was established in 1935. Mr. Khawaja Muzaffar Mahmood laid the foundation of Mahmood Group by entering into tannery business, twelve years before the establishment of Pakistan. Ever since, the group has evolved as a diversified business empire by serving various industries. KTM’s ownership (~84%) directly lies with the sponsoring family, while the remaining (~16%) is laid by an associated Company, ‘Masood Model Ginning Factories (Pvt.) Ltd’. Mr. Ilyas holds the position of Chairman, and his son, Mr. Mehr Ali, is the CEO. Both have decades of experience in the industry.