Liberty Mills Limited

CREDIT RATING REPORT | Jul-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
04-Jul-25 A+ A1 Stable Maintain -
05-Jul-24 A+ A1 Stable Maintain -
07-Jul-23 A+ A1 Stable Maintain -
09-Jul-22 A+ A1 Stable Maintain -
10-Jul-21 A+ A1 Stable Maintain -
About the Entity

Liberty Mills Limited (LML) is an unlisted, public limited concern incorporated in 1964. It is engaged in the business of manufacturing and processing textile fabrics and made-ups. It operates a spinning unit with 11,160 rotors/spindles with a production capacity of 1,700 bags per day and Air Jet & Sulzer weaving unit of 145 & 110 looms with a production capacity of 130,000 meters of fabric per day in the Nooriabad & Karachi locations. Liberty Group holds a ~90% stake in Liberty Power Tech Limited (a 200MW thermal IPP), including ~29% through Liberty Mills Limited.

Rating Rationale

The rating of Liberty Mills Limited (“the Company” or “LML”) emanates from the prominent profile of the Company in the textile industry of Pakistan. The Company is a family-owned, truly vertically integrated textile unit that operates under the umbrella of Liberty Group and is considered a flagship Company. LML product slate is vested in three business segments, which include Home Textile, Health Care Textiles & Apparel. Home Textile occupies the leading position in the Company’s portfolio valuation, followed by Health Care Textile and Apparel. Over the years, LML has achieved consistent and steady growth in business volumes, positively reflecting on its business profile. Despite challenging macroeconomic conditions, the Company achieved topline growth, recording PKR 63.1bln in 9MFY25 compared to PKR 53.9bln in 9MFY24. This growth was primarily driven by improved product pricing dynamics in USD terms and steady business volumes. The surge in energy tariffs over the years, combined with stability in the USD exchange rate, elevated finance costs and increased tax burden for export-oriented units following the transition from FTR to NTR, impacted the Company’s overall cost structure. Despite this pressure, LML’s margins remained highly competitive within the industry. The Company's focus on cost optimization through the implementation of renewable energy projects, including a 9MW wind turbine, a 3.56MW solar installation, and a 4MW battery storage system, benefited the business from core operations. The Company maintains a sizeable investment portfolio through strategic stakes in the power sector and mark-to-market equity investments in blue-chip companies, augmenting its liquidity profile through dividend income inflows and potential capital gains. The Company's strategic focus on a well-defined niche of quality-conscious institutional buyers has led to a concentrated customer base and long-standing relationships with high-profile clients, particularly driven by its significant exposure to the U.S. market. This also enables LML to effectively manage the impact of reciprocal US tariffs. In cognizance of region-wise concentration, the management is pursuing opportunities to expand into new potential markets in Europe. The financial risk profile of the Company is considered moderate, with a slightly stretched working capital cycle depicting the industry norm. The cash flows and coverages of the Company are considered adequate. The working capital requirements are mainly fueled through short-term borrowings. The Company has maintained a leveraged capital structure dominated by subsidized borrowing from SBP.

Key Rating Drivers

The ratings are dependent on the Company’s ability to sustain its product diversity and volumetric growth while maintaining margins and profitability matrix at an optimal level. The maintenance of the debt matrix and improvement in coverages coupled with continuity in generating cashflows from core business operations remain imperative for the assigned ratings.

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

Liberty Mills Limited

rating analysis

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Profile
Legal Structure

Liberty Mills Limited ('the Company' or 'LML') is an unlisted, public limited concern incorporated in 1964.


Background

The Company commenced operations in 1964 as a private limited Company. Later, in 1969, its legal status was changed to a publicly listed Company. In Dec’13, the Company was delisted from the stock exchange.


Operations

The Company is in the business of manufacturing and processing textile fabrics and made-ups. It operates in two main segments: processing (dyeing and printing) and home textiles. The company has set up its backward integration units of spinning and weaving, which are fully in operation and these will enhance efficiency along with limited dependency, going forward. The Company generates electricity for its in-house consumption through captive power generation. Its manufacturing facility is located at the Sindh Industrial and Trading Estate in Karachi and Nooriabad.


Ownership
Ownership Structure

Liberty Mills Limited is the flagship Company of a prominent business and renowned business conglomerate, Liberty Group. The Company's entire shareholding rests with the Mukaty Family through individuals.


Stability

The absence of a formal holding company structure, coupled with the reliance on personal relationships among the key sponsors, has resulted in the lack of a clearly defined succession plan. This poses potential risks to the Company's long-term stability and operational continuity.


Business Acumen

With over four decades of operational history, the sponsoring group has established a strong presence and deep-rooted expertise in Pakistan’s textile and energy sectors. Over the years, the Group has built a reputation for resilience, adaptability, and sectoral knowledge, underpinned by a commitment to innovation and growth. The sponsors bring with them a wealth of diversified industrial experience, having successfully led and managed ventures across multiple sectors. Their strategic insight and hands-on leadership have played a pivotal role in the Group’s sustained expansion and operational success.


Financial Strength

In addition to its established presence in the textile and energy sectors, including wind power projects and aluminum, the sponsoring Group also has an interest in the pharmaceutical industry. The sponsors possess strong financial capacity and have demonstrated a willingness to support the Company, if needed.


Governance
Board Structure

The overall control of the board is vested with seven members from the Mukaty family, chaired by Mr. Muhammad Ashraf. The inclusion of an independent director will strengthen the governance framework of the Company.


Members’ Profile

The Chairman, Mr. Muhammad Ashraf, brings over three decades of extensive experience in Pakistan’s textile industry, marked by strong leadership and deep industry insight. Under his stewardship, the Liberty Group has demonstrated sustained growth and operational excellence. The board comprises seasoned professionals with diverse business exposure across multiple sectors of the country's economy. Their long-standing affiliation with the Group ensures leadership continuity and reflects a strong alignment with the Group’s strategic direction and long-term vision.


Board Effectiveness

In line with best corporate governance practices, the Board has established two committees: Audit Committee and Human Resource & Remuneration Committee. The board meetings are held at regular intervals to review financial performance and monitor progress towards the strategic targets. The draft meeting minutes have been formally documented; however, there is room for improvement.


Financial Transparency

To uphold high standards of transparency, M/s Kreston Hyder Bhimji & Co. Chartered Accountants have been appointed as the external auditors of the Company, rated in “Category A” by the State Bank of Pakistan's panel of auditors. The auditors expressed an unqualified opinion on the financial statements of the Company for the year ended June 30th, 2024.


Management
Organizational Structure

The Company has maintained a well-defined organizational layout to ensure the smooth flow of operations. To address the diverse operational requirements, the key areas of the Company have been segregated into ten functional departments. Each of these departments is led by an experienced head reporting directly to the Company's Chief Executive, Mr. Temoor Ashraf Mukaty.


Management Team

The Chief Executive, Mr. Temoor Ashraf Mukaty, is well-versed in the textile industry and has been a member of the Company’s Board since 2015. Mr. Muhammad Ali Sadiq, a fellow Chartered Accountant, is serving as the Group Director - Finance & IT. He has been associated with the Company for a long time period. The CFO, Mr. Hasan Saleem, brings over 22 years of professional expertise and reports to the Group Director - Finance & IT. He is supported by a team of highly qualified and seasoned professionals.


Effectiveness

Although the Company does not have formal management committees in place. The management meetings are convened to review operational performance, address key business issues, and align on strategic priorities. These meetings facilitate effective communication among senior leaders and support timely decision-making, ensuring ongoing monitoring of the Company’s progress against its objectives.


MIS

The Company has implemented Oracle Fusion for comprehensive reporting. It provides an integrated view of business processes and helps to stay at the forefront of technology in critical areas, including finance, MIS and HR, and a few others. The availability of these technologies ensures a systematic and controlled adoption process to identify any loopholes.


Control Environment

The Company has maintained a well-trained quality control department. The Company is ISO 9001 certified and has established an internal audit department that reports directly to the Chief Executive.


Business Risk
Industry Dynamics

Textile exports of the country reached USD 16.7bln in 9MFY25, 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.lbln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of the export-oriented units, with a 29.0% tax on profits and a super tax of up to 10%.


Relative Position

LML is considered a mid-tier player in the export of value-added products in Pakistan. The Company faces competition from several prominent players such as Sapphire Textile Mills, Kohinoor Textile Mills, and US Apparel & Textiles.


Revenues

A predominant portion of the Company’s revenue base is generated from export sales. However, the local sales have a minimal contribution to the topline. During FY24, the Company's topline demonstrated a robust increase reaching PKR 71.2bln (FY23: PKR 62.7bln). This year-on-year growth was driven by a notable increase in the business volumes, clocking at 40.06mln kgs compared to 34.99mln kgs in FY23. The home textile category leads in terms of both pricing and volumes, followed by garments (made-ups). During 9MFY25, the Company’s total revenue remained largely aligned with the financial projections and clocked at PKR 63.1bln. The Company enjoys long-standing relationships with several prominent players in the international market. However, it has a high dependency on its top three customers: Medline Industries Inc., Turner Bianca PLC, and ASDA Stores Limited, contributing approximately 45% to the Company’s total exports. Despite understressed macroeconomic indicators, the management is anticipating a considerable growth in the business volumes and product prices, going forward.


Margins

The Company's gross profit margin inched up (FY24: 20.3%, FY23: 19.3%), attributed to an increase in revenue. The operating profit reflected an increase and stood at PKR 10.3bln (FY23: PKR 8.2bln) on the back of controlled selling and marketing expenses.  The Company secured a dividend income of PKR 1.9bln (FY23: PKR 1.5bln), providing a cushion to the bottom line. The reliance on conventional and discounted financing facilities by the SBP resulted in elevated finance cost at PKR 6.2bln (FY23: PKR 3.9bln). Despite a manifold increase in the taxation expense at PKR 2.3bln (FY23: PKR 1.0bln), the Company’s bottom line was recorded as historically high at PKR 9.9bln (FY23: PKR 7.6bln). During 9MFY25, the Company’s gross profit margin and net profit margin reflected a downward trend at 16.5% and 5.9% respectively, primarily due to a sharp decrease in the business from core operations


Sustainability

Currently, the Company is operating a spinning unit with 11,160 rotors/spindles with a production capacity of 1,700 bags per day and Air Jet weaving unit of 145 looms having a production capacity of 100,000 meters of fabric per day in the Nooriabad location. In addition to this, the Company is also operating another weaving unit of 110 Sulzer looms in Karachi with an overall capacity of 30,000 meters of fabric per day. The total number of machines in finishing mill / wet processing are 128, having a final production capacity of 368,000 meters per day and made-ups (stitching machines: 2,995 machines). Liberty Wind Power 1 Limited and Liberty Wind Power 2 Limited (of 50 MW each) are wholly owned subsidiaries of the Company and are operational. Both the projects are supplying electricity to the National Grid.


Financial Risk
Working capital

The Company’s working capital requirements are a function of its inventory and receivables, for which the Company relies on a mix of internal generation and short-term borrowings (STBs). In 9MFY25, the Company's net working capital cycle stretched to 187 days (FY24: 173 days) to maintain higher inventory levels, aligning with notable topline growth. Over the years, the Company has maintained a robust liquidity profile, reflected in a strong current ratio of 4.8 times (FY24: 4.3 times). This indicates the Company’s solid ability to meet its short-term obligations and demonstrates prudent working capital management.


Coverages

The Company's free cash flows from operations (FCFO) demonstrated a dilution at PKR 7.6bln (FY24: PKR 9.9bln) with an EBITDA of PKR 10.1bln (FY24: PKR 11.3bln). This decline, coupled with a massive surge in the funding cost led to a slight improvement in the interest coverage at 1.1x (FY24: 0.9x). The Company’s debt payback period increased manifold at 16.0 years (FY24: 3.7 years), mainly due to a drastic increase in the debt book.


Capitalization

The Company maintains a moderately leveraged capital structure. The debt profile was heavily concentrated towards the short-term discounting facilities (Export Refinance Scheme). During 9MFY25, the Company’s debt book experienced an upswing and reached PKR 58.2bln (FY24: PKR 49.5bln). The total leveraging of the Company surged to PKR 54.4% (FY24: 52.3%). The risk absorption capacity remained adequate as portrayed by the enhanced equity base of PKR 48.8bln (FY24: PKR 45.1bln).
 
 

Jul-25

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Liberty 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 24,814 23,528 18,109 16,339
2. Investments 19,893 18,770 10,969 10,922
3. Related Party Exposure 12,102 10,760 10,158 6,208
4. Current Assets 66,684 57,281 41,022 40,503
a. Inventories 33,589 33,350 20,209 24,472
b. Trade Receivables 18,319 16,009 11,820 7,741
5. Total Assets 123,493 110,340 80,259 73,973
6. Current Liabilities 13,830 13,379 9,067 9,346
a. Trade Payables 6,229 8,875 4,796 6,393
7. Borrowings 58,224 49,562 36,088 38,074
8. Related Party Exposure 261 79 212 53
9. Non-Current Liabilities 2,283 2,168 537 466
10. Net Assets 48,896 45,152 34,354 26,035
11. Shareholders' Equity 48,896 45,152 34,354 26,035
B. INCOME STATEMENT
1. Sales 63,112 71,262 62,700 50,290
a. Cost of Good Sold (52,671) (56,791) (50,568) (43,320)
2. Gross Profit 10,441 14,471 12,131 6,970
a. Operating Expenses (3,905) (4,107) (3,896) (3,852)
3. Operating Profit 6,536 10,364 8,235 3,118
a. Non Operating Income or (Expense) 6,758 8,186 4,394 (924)
4. Profit or (Loss) before Interest and Tax 13,295 18,550 12,629 2,193
a. Total Finance Cost (7,118) (6,222) (3,943) (1,724)
b. Taxation (2,433) (2,369) (1,063) (210)
6. Net Income Or (Loss) 3,744 9,958 7,622 259
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 7,627 9,904 11,016 4,132
b. Net Cash from Operating Activities before Working Capital Changes 556 3,686 7,786 2,754
c. Changes in Working Capital (5,544) (11,036) (427) (8,190)
1. Net Cash provided by Operating Activities (4,989) (7,350) 7,359 (5,436)
2. Net Cash (Used in) or Available From Investing Activities (2,068) (5,563) (3,974) (5,891)
3. Net Cash (Used in) or Available From Financing Activities 8,698 8,039 1,502 9,779
4. Net Cash generated or (Used) during the period 1,641 (4,874) 4,887 (1,548)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 18.1% 13.7% 24.7% 47.4%
b. Gross Profit Margin 16.5% 20.3% 19.3% 13.9%
c. Net Profit Margin 5.9% 14.0% 12.2% 0.5%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 3.3% -1.6% 16.9% -8.1%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 10.6% 25.1% 25.2% 1.0%
2. Working Capital Management
a. Gross Working Capital (Average Days) 220 208 187 198
b. Net Working Capital (Average Days) 187 173 154 163
c. Current Ratio (Current Assets / Current Liabilities) 4.8 4.3 4.5 4.3
3. Coverages
a. EBITDA / Finance Cost 1.5 1.9 3.3 2.9
b. FCFO / Finance Cost+CMLTB+Excess STB 0.9 1.3 2.1 1.7
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 16.0 3.7 1.5 4.0
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 54.4% 52.3% 51.4% 59.4%
b. Interest or Markup Payable (Days) 43.4 65.6 107.8 103.7
c. Entity Average Borrowing Rate 18.3% 13.5% 10.0% 4.5%

Jul-25

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Liberty Mills Limited

rating scale

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Jul-25

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Liberty 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.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
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  5. Monitoring and Review
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    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
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  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
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Jul-25

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