PACRA Maintains Entity Ratings of Masood Fabrics Limited

The rating reflects the adequate presence of Masood Fabric Limited (‘the company’ or “MFL) in the textile industry of Pakistan. The principal activity of the company is the manufacturing and sale of grey cloth and yarn. The financial strength of the Company primarily divests into the six companies which operate under the umbrella of the Masood Roomi group which includes Masood Fabrics Limited, Roomi Fabrics Limited, and Masood Apparels (Pvt.) Limited, Roomi Home (Pvt.) Limited, Masood Holdings (Pvt.) Limited, and Roomi Holdings (Pvt.) Limited. The board is dominated by the sponsoring family and acts more in an execution role as they possess considerable industry-specific exposure. The MFL has enhanced product diversity by introducing the production of double yarn and technical fabric. The Company has installed solar power plants to manage energy cost risk. The Company has dependency on the procurement of imported raw cotton reflects inherent supply chain and foreign exchange risk for price transferability. The top customers of the Company are stable entities that provide comfort to the business sustainability. During FY23, the Company generated a topline of PKR 25.36bln (FY22: PKR 24.1bln) mainly dominated by the export segment and their export destinations include mainly Europe and USA. In recent times, the Company profitability matrix has been under stress on account of a consistent surge in the cost of production coupled with magnifying finance costs. However, the non-operating income has created a buffer in the Company's profitability and provided some support to the margins. The financial risk profile of the Company is adequate considering the leveraged capital structure and stretched working capital management. The cashflows and coverages of the Company are considered adequate and need improvement. The Pakistan textile industry size is estimated to be PKR 2.62Trn in LSM (Large Scale Manufacturing) ~3.0% of the total GDP as of FY23. The composite & garment segment in the textile sector has a contribution of ~ PKR 1.6Trn mainly dominated by knitwear, readymade garments, bedwear, and towels followed by PKR 775bln from spinning and PKR 637bln from weaving. The escalation in energy tariffs & finance costs, PKR devaluation, and ensuring the availability of optimum quality raw materials are prime challenges specific to the industry to assess the international market and stay price-wise competitive
The ratings are dependent upon the Company’s ability to prudent working capital management. Improvement in coverages, sustainability of margin, and sufficient generation of cash flows from core operations while expanding business volumes remains vital. Adherence to the debt matrix at an optimal level is a prerequisite for assigned ratings.

About the Entity
Masood Fabrics Limited is a venture of Masood-Roomi Group, which was established in 2021; previously it was part of Mahmood Group till 2021, established in 1935 by entering the tannery business, now tannery is not part of Masood-Roomi Group. Masood Roomi provides an array of products and services for real estate, spinning, weaving, bed & bath, and apparel industries. The company has an installed capacity of 32,640 spindles and 260 looms Overall control vest with seven board members, all of whom are from the sponsoring family. Mr. Khawaja Jalaluddin Roomi is the CEO of the Company and has more than 30 years of experience in the textile industry. He is supported by a team of seasoned professionals who work under various sub-divisions to ensure efficiency