Masood Textile Mills Limited

CREDIT RATING REPORT | Jun-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
04-Jun-25 A A2 Stable Maintain -
12-Jun-24 A A2 Stable Initial -
About the Entity

Masood Textile Mills Limited 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.

Rating Rationale

The rating of Masood Textile Mills Limited (‘the Company’ or ‘MTM’) underscores the Company’s prominent business profile in the value-added textile products. MTM is a fully vertically integrated textile manufacturer, leveraging state-of-the-art production facilities and rigorous quality control standards that meet international customer requirements. Its operations span the entire textile value chain, including Spinning, Knitting, Yarn and Fabric Dyeing, Laundry, Printing, Embroidery, and Apparel Manufacturing. MTM preserves a unique sense of craftsmanship in the creation and development of high-quality knitted apparel, with a growing focus on fashion-forward garments designed for contemporary everyday wear. Its competitive edge lies in precision production, design innovation, and the ability to deliver high-quality garments across diverse product grades. Business stability is further reinforced by MTM’s long-standing partnerships with a well-diversified clientele of globally recognized and financially robust international brands. These include global industry leaders such as JCPenney, Quicksilver, Hugo Boss, Zara, Marks & Spencer, PVH, Footlocker, among others. The Company’s revenue saw a marginal YoY decline of ~2.3%, settling at PKR 58.7bln in FY24 (FY23: PKR 60.1bln; 9MFY25: PKR 44.6bln). The decline was primarily attributable to reduced sales volumes, as the Company adopted a profit-centric strategy marked by a shift in product positioning—from basic to higher-margin, fashion-oriented garments. MTM regained momentum as its previously disrupted supply chain stabilized, coupled with a gradual reduction in the policy rate, which eased cost pressures, resulting in a consolidated profit after tax (PAT) of PKR 661.7mln over the past two quarters. MTM is undertaking CAPEX to install a ~12-megawatt solar power plant in two phases, out of which ~6 megawatt will be operationalized during 2025, along with a biomass power project, to manage rising energy costs. The Company’s financial risk profile is considered adequate, though characterized by stretched working capital management and a highly leveraged capital structure, driven by intensive working capital needs that are primarily financed through short-term borrowings. The credit quality metrics of the Company are considered adequate. The textile industry is grappling with several key challenges, including evolving global demand and consumption trends, alongside mounting pressures on price competitiveness. These pressures stem from a revision in the minimum wage, elevated energy tariffs, which despite a reduction, remain high in regional comparison, reliance on imported cotton due to an 18% GST on local procurement, and the looming imposition of a 29.0% reciprocal tariff on exports to the United States, currently deferred for 90 days. The Company maintains a considerable ~43% exposure to the U.S. market. The team of MTM is in dialogue with US-based customers and trying to evolve a solution which will provide continuity to their sales

Key Rating Drivers

The ratings are dependent upon the improvement in profitability while expanding business volumes. The efficient utilization of short-term borrowings to induce growth in sales play a pivotal role. Adherence to the debt matrix while generating sufficient cash flows and maintaining coverages at an optimal level is a prerequisite for assigned ratings

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Masood Textile Mills Limited

rating analysis

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Profile
Legal Structure

Masood Textile Mills Limited (“MTM” or “The Company”) is a public limited company incorporated in 1984 under the Companies Act, 1913 (now Companies Act, 2017) and listed on the Pakistan Stock Exchange (“PSX”) in 1988.


Background

The Company was initially a spinning Company acquired from Mehmood Group in 1984. MTM after the inclusion of Chinese investors as strategic partners grew into a truly vertically integrated textile unit focusing on exports of value-added highly fashioned products.


Operations

The principal business activity of the Company is the manufacturing and sale of cotton / synthetic fibre yarn, knitted and dyed fabrics, and garments. The company’s vertically integrated operations—spanning 19,968 spindles for diverse yarns, 853 active and 143 seasonal knitting machines, and 5,000 stitching machines—demonstrate strong production scalability. The Company’s total energy requirement stood at ~17 M.W, which is primarily met through FESCO and captive generators. The registered office of the Company is situated in Universal House, 17/1, New Civil Lines, Bilal Road, Faisalabad. 


Ownership
Ownership Structure

The company's ownership is concentrated among a few major shareholders. Ms Nazia Nazir w/o Mr Shahid Nazir Ahmad has an ownership stake of ~ 30.17%, Chinese investors cumulatively hold a 37.09% stake. Directors hold a minimal 2.39%. The remaining shareholding mainly vests with Joint Stock Companies (10.72%), National Bank of Pakistan (6.72%), NIT and ICP (3.29%) & general public (~9.62% ).


Stability

The sponsors have a long-term association with the Company and the textile business.A formal documented succession plan will augment the ownership framework of the Company.


Business Acumen

Mr. Shahid Nazir Ahmad, CEO of Masood Textile Mills Limited, has been instrumental in transforming the company from a spinning unit into Pakistan’s leading vertically integrated textile enterprise. His strategic leadership, backed by deep expertise in production, IT, marketing, and administration, has driven the company’s sustained growth and operational excellence.


Financial Strength

The Company's financial stability stems from its disciplined single-line-of-business strategy, supported by long-term sponsor commitment. As a dedicated textile exporter, MTM has built enduring partnerships with leading global brands, ensuring consistent revenue streams and operational efficiency.


Governance
Board Structure

The Board is composed of seven members, including the Chairman and Chief Executive Officer. Among them, three serve as Nominee Directors—one representing NIT and two representing Shanghai Challenge Textiles Co. Ltd.—while two are Independent Directors. The inclusion of independent oversight has significantly enhanced the Company's corporate governance framework


Members’ Profile

The Board of Masood Textile Mills Limited (MTM) comprises seasoned professionals with expertise in technology, textiles, finance, and global business. Chairman Mr. Naseer Ahmad Shah, an IT expert with 38+ years in ERP systems, provides strategic oversight. CEO Mr. Shahid Nazir Ahmad, an MBA from London, has driven MTM’s growth into a leading vertically integrated textile enterprise. Nominee directors Ms. Chen Yan and Mr. Shibin Yang (Shanghai Challenge Textile Co. Ltd) contribute 20+ years of international textile leadership. Mr. Shoaib Ahmad Khan (National Investment Trust) adds banking and Islamic finance expertise, while Mr. Shahid Iqbal and Mr. Malik Shahid Mehmood bring decades of experience in finance, marketing, supply chain, and corporate strategy.


Board Effectiveness

The Board holds quarterly meetings with consistent participation from all members, reflecting their strong commitment to strategic oversight. Detailed minutes are diligently documented to ensure transparency and accountability. To support effective decision-making, the Board is assisted by four specialized sub-committees: the Audit Committee, Risk Management Committee, the Nomination Committee, and Human Resource & Remuneration and Sustainability Committee.


Financial Transparency

Riaz Ahmad & Company Chartered Accountants are the external auditors of the Company. The auditor is listed in Category “A” of the State Bank’s panel of auditors. They have expressed an unqualified opinion on the financial statements of the Company for the year ended 30 June 2024. The Company has an in-house internal audit function. 


Management
Organizational Structure

The organizational structure demonstrates a clear hierarchy and a strong governance framework. The Board of Directors, led by the Chairman, provides strategic oversight, while the CEO manages core business functions. Key departments—Finance, HR, Marketing, Supply Chain, and Production—report directly to the CEO, ensuring streamlined operations. The CFO oversees financial planning, taxation, and MIS, while the Head of Production manages vertically integrated units: Processing, Apparel, Spinning, and Knitting. Independent Internal Audit enhances control and accountability.


Management Team

The management team is headed by the CEO, Mr. Shahid Nazir Ahmad. He is supported by a highly trained, qualified, and experienced team. Mr. Tanveer Ahmad Siddiqui, CFO, is a seasoned finance professional with 32 years of experience. He completed his CA articles in 1990 with Riaz Ahmad & Co Chartered Accountants, and holds an MBA in Finance and a B.Com from the University of the Punjab. He plays a vital role in ensuring the Company’s financial stability


Effectiveness

The management meetings are held periodically with a prime focus on the status of projected targets and feedback on the development and implementation of business strategies


MIS

The Company has developed an in-house centralized database system- ERP (enterprise resource planning) for systems integration. The systems mainly categorized under the umbrella of ERP are Financial Accounting systems, Quality management systems, machine management systems, inventory management & production management systems etc.


Control Environment

MTM produces each garment with a unique ID tracking number which is attached inside the garment, and it backtracks from cotton crop type, yarn, knitting, fabric processing, cutting, stitching operations & inspections to packaging and shipment. The Company has adopted Lean Manufacturing best practices in its production facility by using RFID (Radio Frequency Identification) technology in its production lines. This RFID technology helps real-time production activity and item tracking.


Business Risk
Industry Dynamics

The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. During 6MFY25, the textile exports stood at USD 9.1bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry


Relative Position

The Company has established its foot prints in the textile product market over a period of ~ 04 decades. 


Revenues

The Company's topline is dominated by the exports segment. During FY24, the company's topline recorded PKR 58.7bln (FY23: PKR 60.1bln, 9MFY25: PKR 44.6bln), primarily attributable to reduced sales volumes, as the Company adopted a profit-centric strategy marked by a shift in product positioning—from basic to higher-margin, fashion-oriented garments. The sales from exports declined to PKR 46.1bln in FY24 (FY23: PKR 52.7bln), whereas the local segment witnessed an increase (FY24: PKR 12.6bln, FY23: PKR 7.4bln). Exports are primarily volume-driven, with the USA as the top destination, followed by Germany, Sri Lanka, and other countries. JC Penny Purchasing LLC remains the Company's top customer during the period, contributing ~19.6% to the Company's topline. 


Margins

During FY24, the Company's gross margins improved to 16.2% (FY23: 13.5%) mainly due to improvement in product price dynamics as the Company shifts its product mix towards fashion-oriented garments. The operating margin improved to 9.1 % (FY23: 5.1%) driven by optimized selling and administration expenses. The Company's finance cost magnified and clocked at PKR 5bln (FY23: PKR 3.2bln). The Company has reported a net loss of PKR 470mln during FY24, with the net margin of -0.8% (FY23: 4.4%). During 9MFY25, the Company's gross and net margin clocked at 15.0% and -0.7% respectively, reflecting the stressed cost structure. 


Sustainability

A biomass power generation and solar power plant project is under consideration to optimize energy costs. MTM has a research and development Centre in Humen, China strives to achieve rapid introduction of new and improved products by adopting a disciplined and customer-focused approach to product development.


Financial Risk
Working capital

During FY24, the Company’s net working capital cycle extended to 145 days (FY23: 133 days; 9MFY25: 149 days), primarily due to an increase in inventory holding period (FY24: 89 days; FY23: 79 days; 9MFY25: 99 days). The working capital requirements were financed through a combination of internally generated cash flows and short-term borrowings. The Company’s short-term trade leverage stood at 11.0% during FY24 (FY23: 17.7%; 9MFY25: 16.6%), while the current ratio was maintained at 3.4x (FY23: 3.7x; 9MFY25: 3.8x).


Coverages

During FY24, the Company generated FCFO of PKR 6,155mln (9MFY25: 3,345mln; FY23: 7,400mln), attributable to a decline in profitability.  Over the years, the consistent surge in finance costs (FY24: PKR 5,000mln, FY23: PKR 3,199mln) has impacted the coverage of the Company as the Company's interest coverage and debt coverage ratio clocked at 1.3x and 1.0x, respectively. During 9MFY25, the Company's interest coverage and debt coverage ratio stood at 1.2x and 0.9x, respectively. 


Capitalization

During 9MFY25, the equity base of the Company stood at PKR 16.6bln (FY24: PKR 16.7bln, FY23: PKR 17.2bln). The Company operates in a highly leveraged capital structure of 61.4% (FY24: 60.1%), and it is dominated by short-term borrowings of PKR 22.3bln (FY24: PKR 22.1bln) to fuel working capital requirements. 
 
 

Jun-25

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Masood Textile Mills Limited

financial summary

(PKR mln)

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Mar-25
9M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 16,114 17,401 15,495 14,246
2. Investments 11 10 9 8
3. Related Party Exposure 0 0 0 0
4. Current Assets 39,491 37,740 38,786 33,466
a. Inventories 16,180 16,038 12,703 13,252
b. Trade Receivables 15,660 14,122 16,727 12,425
5. Total Assets 55,617 55,152 54,290 47,720
6. Current Liabilities 10,263 11,186 10,472 8,905
a. Trade Payables 6,566 7,033 5,992 5,158
7. Borrowings 26,407 25,175 24,880 23,923
8. Related Party Exposure 0 0 0 0
9. Non-Current Liabilities 2,328 2,108 1,722 1,395
10. Net Assets 16,619 16,682 17,215 13,497
11. Shareholders' Equity 16,619 16,682 17,215 13,497
B. INCOME STATEMENT
1. Sales 44,587 58,677 60,106 54,147
a. Cost of Good Sold (37,895) (49,151) (52,018) (47,605)
2. Gross Profit 6,692 9,526 8,088 6,542
a. Operating Expenses (3,776) (4,184) (5,049) (4,348)
3. Operating Profit 2,916 5,342 3,039 2,194
a. Non Operating Income or (Expense) 314 116 3,650 2,290
4. Profit or (Loss) before Interest and Tax 3,230 5,458 6,689 4,484
a. Total Finance Cost (2,964) (5,000) (3,199) (1,473)
b. Taxation (585) (928) (839) (735)
6. Net Income Or (Loss) (319) (470) 2,651 2,276
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 3,345 6,155 7,400 5,203
b. Net Cash from Operating Activities before Working Capital Changes 153 1,186 4,772 3,836
c. Changes in Working Capital (2,232) 869 (4,078) (3,841)
1. Net Cash provided by Operating Activities (2,079) 2,055 694 (5)
2. Net Cash (Used in) or Available From Investing Activities 448 (2,933) (1,106) (1,220)
3. Net Cash (Used in) or Available From Financing Activities 1,554 122 890 1,403
4. Net Cash generated or (Used) during the period (77) (756) 477 178
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 1.3% -2.4% 11.0% 46.0%
b. Gross Profit Margin 15.0% 16.2% 13.5% 12.1%
c. Net Profit Margin -0.7% -0.8% 4.4% 4.2%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 2.5% 12.0% 5.5% 2.5%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] -2.6% -2.8% 17.3% 18.7%
2. Working Capital Management
a. Gross Working Capital (Average Days) 190 185 167 150
b. Net Working Capital (Average Days) 149 145 133 121
c. Current Ratio (Current Assets / Current Liabilities) 3.8 3.4 3.7 3.8
3. Coverages
a. EBITDA / Finance Cost 1.5 1.5 2.8 4.8
b. FCFO / Finance Cost+CMLTB+Excess STB 0.9 1.0 1.5 1.6
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 6.2 2.3 1.0 1.5
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 61.4% 60.1% 59.1% 63.9%
b. Interest or Markup Payable (Days) 56.0 61.9 96.0 66.2
c. Entity Average Borrowing Rate 14.6% 19.5% 12.4% 5.3%

Jun-25

www.pacra.com

Masood Textile Mills Limited

rating scale

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Jun-25

www.pacra.com

Masood Textile Mills Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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Jun-25

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