PACRA Maintains the Entity Ratings of Mughal Iron & Steel Industries Limited

Mughal Iron & Steel Industries Limited ("Mughal" or "the Company") is a prominent player in the steel industry. During FY26, the sector operated in a two-phased environment: macroeconomic stabilization and easing financial conditions supported business activity for most of the year, while renewed inflationary and heightened geopolitical uncertainty tempered momentum in the latter part. The sector continues to face reliance on imported raw materials, elevated energy costs and regulatory changes, although the country's structural housing and infrastructure requirements continue to underpin steel demand. Against this, Mughal strengthened its position in the domestic ferrous segment, where sales volumes increased, supported by higher production at its melting furnaces and rolling mills, with capacity utilization improving to around 59% and 52%, respectively (FY25: 51% and 48%). Major works on the balancing, modernization and replacement (BMR) of its bar re-rolling mill have been completed, and the upgraded mill is expected to enhance operational efficiency and product flexibility. The non-ferrous segment was temporarily suspended in view of volatility in international commodity markets and associated risks, resulting in lower export volumes. Consequently, net sales moderated to PKR 77.958bln in FY26 (FY25: PKR 89.414bln), mainly due to lower average selling prices and reduced exports, with the ferrous segment contributing around 91.5% of revenue. Despite the lower topline, the gross margin improved to 11.1% (FY25: 9.1%) on a favorable sales mix, operational efficiencies and disciplined inventory management, while the net margin rose to 3.2% (FY25: 1.08%) as finance costs eased amid the declining interest rate environment. Working capital management remained sound, supported by a strong liquidity position. Borrowings rose to PKR 38.068bln (FY25: PKR 28.014bln), mainly on account of fresh long-term financing for permanent working capital and the BMR of the bar re-rolling mill, taking leveraging to 51.2% (FY25: 49.3%). Subsequent to the year end, the Company’s subsidiary achieved the Commercial Operation Date (COD) of the main 31.50 MW turbine of its 36.50 MW captive hybrid power plant with effect from August 31, 2026; as a captive source of power, the plant is expected to reduce energy costs and further strengthen operational efficiency.
The ratings remain dependent on the Company's ability to sustain its business profile amid evolving sector conditions, including the regulatory environment, demand trends in the housing and infrastructure sectors, and movements in raw material prices and energy costs. As per management, the non-ferrous segment has been suspended on a temporary basis, and any resumption, given its relatively higher-margin contribution, will be monitored for its impact on the topline and profitability. Maintaining the improvement in overall revenues and margins, together with timely servicing of the higher debt, remains important. Sustained working capital discipline, particularly receivable collection, the successful commissioning of the BMR project and a reliable energy supply from its hybrid captive power plant are also key considerations.

About the Entity
Mughal Iron & Steel Industries Limited, a public limited company incorporated in 2010, is primarily engaged in the manufacturing and sale of mild steel products related to ferrous segments. Mughal operates with a melting capacity of 590,000M.T., rerolling capacity of 630,000M.T., and non-ferrous recycling capacity of 90,000M.T. Currently, a seven-member BoD is monitoring the overall functioning under the chairmanship of Mr. Mirza Javed Iqbal. Mr. Khurram Javaid serves as the CEO and is the driving force behind the Company.