PACRA Assigns Preliminary Ratings to Masood Textile Mills Limited PPSTS - PKR 2.0bln - TBI

The ratings of Masood Textile Mills Limited ('MTM' or 'the Company') underscore its prominent and well-entrenched business profile within Pakistan's value-added textile sector. MTM operates as a fully vertically integrated textile manufacturer, with state-of-the-art production infrastructure spanning the entire textile value chain. The operations encompass Spinning, Knitting, Yarn and Fabric Dyeing, Laundry, Printing, Embroidery, and Apparel Manufacturing. The operations are underpinned by rigorous quality control standards calibrated to the exacting requirements of globally recognized international fashion and retail brands. Business stability is firmly reinforced by MTM's long-standing partnerships with a well-diversified clientele of financially robust international brands, including JCPenney, Hugo Boss, Scotch & Soda, Foot Locker, and Quiksilver, with the garments segment constituting the 81.4% of total revenues. Such long-standing relationships with globally recognized brands distinguish the Company from its industry peers in terms of reliability and market positioning, providing comfort to the assigned ratings.
MTM’s revenue for FY25 stood at PKR 59.2bln, reflecting a marginal YoY growth of 1.0% (FY24: PKR 58.7bln), with 6MFY26 revenues at PKR 24.5bln, indicating stable operational performance. The Company reported a turnaround in profitability, posting a PAT of PKR 131mln, primarily driven by a 22.8% reduction in finance costs amid monetary easing. As of 6MFY26, profitability further strengthened to PKR 407mln, reinforcing the Company’s improved earnings trajectory. The Company has shifted its focus to European markets, targeting high-end fashion clients to improve margins. Additionally, it has installed a 6.4MW of solar capacity during FY25 with an additional 3.8MW in the pipeline, supporting cost optimization and energy efficiency. The Company’s financial risk profile is considered stable, supported by optimal working capital management. Cash flows remain sufficient with moderate coverage. MTM's net working capital requirements are primarily met through short-term borrowings and internally generated cash flows. Masood Textile maintains a leveraged capital structure, mainly skewed towards short term borrowings. Long-term conventional financing is used to fund CAPEX in the textile value chain over the years. Lately, the Company has decided to supplement its working capital requirements by way of the issuance of commercial paper.
The ratings are dependent on sustained revenue growth and margin maintenance.

About the Entity
Masood Textile Mills Limited ('MTM' or 'the Company') 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 is in process to issue a PKR 2,000mln Rated, Privately Placed and Secured Short-Term Sukuk ("Sukuk") to finance the Company’s working capital requirements. The profit payments will be made on a quarterly basis during the period of 6-month. Sukuk will be redeemed in bullet at maturity, with principal and remaining profit payable at the end of the tenor. The instrument carries a markup rate of 6MK+100 bps. The underlying instrument will be secured by a ranking charge over the Company’s current assets. The issuer shall maintain and effectively manage a Debt Payment Account ("DPA") under the exclusive lien of the Investment Agent will be funded in four equal tranches of PKR 500mln each, commencing 30 days prior to maturity and concluding 1 day before the maturity date, ensuring the full amount is available in the DPA before the maturity date.