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

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. 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 81.4% of total revenues.. MTM's revenue for FY25 stood at PKR 59.2bln, reflecting a marginal YoY growth of 1.0% (FY24: PKR 58.7bln), while 6MFY26 revenues stood 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 towards European markets, targeting high-end fashion clients to improve margins. Additionally, it installed 6.4MW of solar capacity during FY25, with a further 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. The Company maintains a leveraged capital structure, mainly skewed towards short-term borrowings, while long-term conventional financing has been utilized to fund CAPEX across the textile value chain over the years. The Company continues to utilize short-term capital market financing to supplement its working capital requirements. The proposed financing is secured through a ranking charge over fixed assets, providing additional structural support to the instrument.
The ratings are dependent on sustained revenue growth and margin maintenance. Continued improvement in profitability, prudent working capital management, and maintenance of adequate liquidity and coverage remain important rating considerations. Any material weakening in operating performance, cash flow generation, or financial risk profile may exert pressure on the ratings.

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 Rated, Privately Placed Short-Term Sukuk of PKR 2,000mln, including a Green Shoe Option of PKR 500mln, carrying a profit rate of 6M-KIBOR+100bps with a tenor of six months. The instrument is secured through a ranking charge over the Company's fixed assets, along with a Debt Payment Account (DPA) maintained under lien of the Investment Agent. Under the DPA mechanism, PKR 500mln each will be deposited 30, 15, 7 and 1 day(s) prior to maturity, ensuring availability of the full issue amount prior to redemption. Profit will be paid quarterly, while the Sukuk will be redeemed through a single bullet repayment at maturity.