PACRA Assigns Initial Ratings to Masood Spinning Mills Limited | PPSTS III | PKR 2.0bln | Jun-26

The assigned ratings of Masood Spinning Mills Limited (“MSML” or “the Company”) are underpinned by the Company’s formidable presence within the competitive textile landscape. Over the years, the Company has strengthened its foothold through sustained operations and product diversification, meeting the requirements of its top clientele. The Company is engaged in the manufacturing and sale of multiple categories of yarn, fabric and socks. Lately, the Company has ventured into high potential socks segment, offering attractive margins. The socks segment offers a broader range of socks, including fashion wear, medicated socks, sports wear, and formal wear. This initiative was undertaken to capitalize on the rising demand for value-added products in the international market. The operational efficiencies in this unit have now been fully realized.
During 9MFY26, the Company achieved a topline of PKR 26.9bln (9MFY25: PKR 23.5bln), reflecting sustained business momentum. Revenue growth was primarily driven by management's strategic focus on a profit-centric business model, prioritizing value creation and margin enhancement over volume-led growth. Consequently, the sales mix shifted towards the domestic market, enabling the Company to capitalize on favorable pricing dynamics. Furthermore, the socks segment continued to exhibit a gradual growth, contributing to product diversification. The Company's profitability indicators remained resilient, supported by continued optimization of the cost structure through strategic investments in renewable and cost-efficient energy solutions. These initiatives, coupled with disciplined operational execution, translated into improved bottom-line performance, with profit after tax increasing to PKR 369mln (9MFY25: PKR 189mln).
The Company's financial risk profile remains adequate, supported by improved cash flow generation and debt servicing capacity. While leverage continues to remain elevated, management is actively pursuing a structured deleveraging strategy through the monetization of selected non-core assets and group-owned properties. The expected realization of these proceeds is anticipated to enhance working capital liquidity and facilitate a gradual reduction in outstanding debt, thereby strengthening the Company's capital structure by the end of FY26.
The preliminary ratings of the instrument derive strength from the underlying security structure, primarily anchored by the Sukuk Payment Account (“SPA”) mechanism established under the lien of the Investment Agent. The SPA will commence funding during the month preceding maturity through equal weekly contributions equivalent to one-fourth of the principal amount, thereby ensuring that the entire issue amount is available in the designated account at least two days prior to the maturity date. The principal and profit obligations will be settled through a bullet payment at the time of maturity. Furthermore, the instrument is also secured through a ranking charge over the present and future current assets of MSML, including all inventory, in addition to a cross-corporate guarantee extended by Mahmood Textile Mills Limited.

About the Entity
MSML operates as a public limited Company. The sponsors cumulatively own the majority shareholding through individuals and associated companies. Overall control of the board is vested with six BODs.

About the Instrument
MSML has issued a Rated, Secured, Privately Placed, Short-Term Shariah-Compliant Sukuk of PKR 2,000mln in June 2026. The purpose of the instrument is to finance the working capital requirements. It carries a markup rate of 1M Kibor+125bps with a tenor of six months.