PACRA Maintains the Entity Ratings of Masood Spinning Mills Limited

Masood Spinning Mills Limited (“MSM” or “the Company”) rating emanates from the adequate profile of the Company in the spinning industry of Pakistan. The assigned rating takes comfort from the presence of the Mahmood group- the sponsoring group. The Mahmood group has an appreciable presence in multiple business segments and is considered one of the leading textile conglomerates in the country. The principal activity of the Company is the manufacturing and sale of yarn, cotton seed and cotton lint with an average yarn count ranging from 20s to 80s and an operational capacity of 101,664 spindles. As per the MSM management presentation, the Company has a capacity utilization of 98.0% as of Dec-23 improved slightly from last year. The Company has a family-dominated board and possesses an execution matrix. The Company's management has industry-specific experience, and its organizational structure demonstrates adequate delegation of authority matrix. The sales portfolio of MSM is reflected in an optimal mix of local and export sales. The product slate of the Company is categorized under specialized yarn which includes natural fibers, re-generated fibers and synthetic fibers. The top line of the Company has shown a growth of 31.1% YoY basis and stood at PKR 31.93 bln as of FY23. Despite under-stressed macroeconomic indicators, the Company succeeded in keeping its profitability matrix at an adequate level. The Company has executed a CAPEX by venturing into vertical integration soon through the commercialization of sock units to diversify its revenue streams and augment sustainability. The Company has installed solar power plants to manage energy cost risk. The financial risk profile of the Company is considered adequate with a slightly stretched working capital cycle depicting the industry norm. The working capital requirements of the Company are primarily met through short-term borrowings with adequate cashflows and coverages. The management of the Company is mindful to keep aligning their financial performance with financial projections. The spinning industry is highly fragmented and consists of ~368 dedicated spinning units with an estimated size of PKR 775bln and 13.4mln number of spindles installed as of FY23 according to an economic survey of Pakistan. The projected cotton production estimate is revised and projected to be 11.5mln bales and currently, production reached up to ~8.26mln bales surpassing FY23 total production of 4.91mln bales. During FY24 better local raw cotton yield is expected to supplement the Companies for import substitution. Pakistan's requirement for imported cotton stands at 3.5 million bales to 4 million bales this year. The recent elevation of energy tariffs and the availability of locally procured raw cotton are the prime challenges specific to the industry.
The ratings are dependent upon sustainable growth in the top line while maintaining the profitability matrix at an optimal level. The generation of sufficient cashflows and ameliorated coverages remains critical. The adherence to debt matrix at an adequate level is a prerequisite for assigned ratings.

About the Entity
Masood Spinning is a venture of Mahmood Group, established in 1935, by entering the tannery business. Now, the group has a presence in the complete cotton chain, tanneries, real estate, and food. Cumulatively, the group operates ~222,384 spindles and ~196 looms. The Group Sponsors cumulatively own 100% shareholding directly and through associated companies. Overall control vest with Seven BODs. Mr. Khawaja Muhammad Younus is the CEO of the Company and has over four decades of experience. He is supported by a team of seasoned professionals.