PACRA Assigns Preliminary Ratings to Masood Spinning Mills Limited | PPSTS -IV | PKR 3.5bln | TBI

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 the 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.
The Company's topline maintained a healthy growth trajectory, increasing to PKR 37.4bln during FY26 (FY25: PKR 31.2bln), reflecting sustained business momentum. Revenue growth was primarily driven by management's strategic emphasis on a profit-centric business model, prioritizing value creation and margin enhancement over volume-led expansion. Additionally, investments in renewable energy infrastructure contributed to improved core operating performance through enhanced cost efficiencies. Consequently, the Company's profitability indicators exhibited a positive trend, translating into stronger bottom-line performance (FY26: PKR 765mln; FY25: PKR 352mln). This positive momentum is expected to sustain through the upcoming quarters, supported by continued operational efficiencies, renewable energy savings, and disciplined cost optimization initiatives.
The Company's financial risk profile improved, supported by management's well-defined deleveraging strategy and prudent working capital management. The execution of this strategy has commenced, with the disposal of non-current assets held for sale and the monetization of group-owned properties. These proceeds have been primarily utilized to reduce the outstanding debt levels, translating into a modest recovery of coverage metrics and leverage. Management is actively proceeding with the enhancement of working capital liquidity. Going forward, the continued and timely execution of this strategy is expected to further strengthen the Company's financial risk profile over the medium term.
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 before the maturity date. 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 intends to issue a Rated, Secured, Privately Placed, Short-Term Shariah-Compliant Sukuk of PKR 3,500mln (inclusive of a green shoe option of PKR 500mln). The purpose of the instrument is to finance the working capital requirements. It carries a markup rate of 1M Kibor + 150bps with a tenor of six months. The principal will be settled through a bullet payment at the time of maturity, while the markup profits will be paid on a monthly basis.