Masood Spinning Mills Limited (“MSML” or “the Company”) was incorporated in Pakistan on July 20, 2000, as a public limited company under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). The Company is a business venture of the Mahmood Group, which has expanded steadily since its inception in 1935 and has evolved into a prominent industrial group. The Company operates three production units: Unit 1 and Unit 2, located in Kabirwala, Khanewal District, near the Company’s head office in Multan, and Unit 3, situated in Phool Nagar, Kasur District. Collectively, these units have an installed capacity of 103,845 spindles and 322 knitting machines. In recent years, the Company invested in a socks manufacturing unit to diversify its product portfolio, which has been operating at maximum capacity utilization since January 2025. The Company’s total electricity requirement of approximately 14.6 megawatts is met through captive power generation. In addition, backup power is available through connections with LESCO and MEPCO to ensure uninterrupted operations. To further optimize production costs, the Company has fully operationalized a 13.5-megawatt solar power project.

The Company's major stake rests with the sponsors through individual holdings and associated companies. The sponsoring group maintains a clearly defined shareholding structure vested among the three brothers of the Khawaja family. Their mutual understanding and alignment on the operations of the group companies contribute to the overall stability of both the sponsoring group and the Company. However, the formal documentation of a succession plan would further enhance the clarity and stability of ownership. All three brothers bring extensive experience to the textile industry, each with over four decades of involvement in managing the group’s businesses. The third generation of sponsors is already actively engaged in the day-to-day operations of various group companies, supporting business continuity and future growth. The Company’s financial strength is underpinned by the strong financial backing of the sponsors. In addition to MSML, the Mahmood Group operates four other entities within the textile sector: (i) Multan Fabrics (Pvt.) Limited, (ii) MG Apparel, (iii) Cotton Ginning Factories, and (iv) Mahmood Textile Mills Limited. This diversified presence within the textile value chain demonstrates the sponsors’ strong capacity to support the Company, if required.

Overall control of the Board rests with six members from the sponsoring family. The inclusion of an independent director on the Company’s Board would further strengthen its governance framework. Mr. Khawaja Muhammad Ilyas, Chief Executive Officer, brings over four decades of experience in the textile industry and has held key positions in various local corporate bodies in Pakistan. The other directors possess expertise across multiple stages of the textile value chain, reflecting a well-balanced skill mix on the Board. In FY25, four BOD meetings were held with high attendance from the members. Meeting minutes are formally documented; however, there remains room for further improvement in this area. To support the Board in its oversight responsibilities, two sub-committees have been constituted: the Audit Committee and the Human Resource Committee. In line with high standards of transparency, M/s Shinewing Hameed Chaudhri & Co., Chartered Accountants, have been appointed as the Company’s external auditors. The firm is rated in Category “B” by the State Bank’s panel of auditors. The auditors have expressed an unqualified audit opinion on the financial statements for the year ended June 30, 2025.

The Company operates primarily in two distinct divisions before delegating strategic decisions to a single overseeing body. At this highest level, the departments are as follows: (i) Audit, (ii) Taxation, (iii) HR and Administration, (iv) IT and ERP, (v) Export and Import, (vi) Purchase and Production, (vii) Corporate Affairs, (viii) Marketing, and (ix) Finance. The CEO, Mr. Khawaja Muhammad Ilyas, has over four decades of experience in the textile sector. He holds a directorship position on the board of various group companies. He is supported by a team of seasoned professionals. The management's responsibilities are clearly delineated. While the Company does not have formal management committees, it possesses a strong IT infrastructure and controls to support seamless operations. For comprehensive reporting, the Company has embraced digitalization and the principles of Industry 4.0 through the implementation of Oracle Fusion across all operational segments. The Company adheres to the latest quality assurance standards for the production and trade of yarn. On an operational level, samples of cotton and yarn are tested in the laboratories of each manufacturing unit.

A predominant portion of the Company's revenue is generated from local sales. In FY25, the Company's topline registered a year-on-year decline to PKR 31.2bln (FY24: PKR 36.2bln), primarily attributable to a strategic change amid unfavorable yarn pricing in the internataional market. The local sales were reported at PKR 22.3bln (FY24: PKR 24.9bln). Locally, the Company mostly sells to several big players in the respective industry. The top customers of the Company are well-established and stable entities: Gul Ahmed Textile Mills Limited, Orient Textile Mills Limited, Al Rahim Textile Industries Limited, Kohinoor Mills Limited, and Mustaqim Dyeing & Printing Industries (Pvt). Limited. The Company's top ten client concentration remained within a moderate range. The export sales also decreased to PKR 8.9bln (FY24: PKR 11.3bln), primarily due to intense competition from regional players. The export destinations of MSML include China, Bangladesh, Turkiye, Portugal, Germany, and a few others, reflecting a low geographic concentration risk. The Company's gross profit margin inched up (FY25: 14.0%; FY24: 13.8%). This was driven by the strategic investment in a solar project to curb the impact of higher energy tariffs. The gradual decrease in the interest rate provided a cushion to the bottom line alongside a reduction in taxation expense. The Company's bottom line posted a notable increase at PKR 352mln (FY24: PKR 148mln), with the net profit margin rising to 1.1% (FY24: 0.4%). In 1QFY26, the Company's topline illustrated an improvement at PKR 8.1bln (1QFY25:PKR 6.7bln). The Company's gross profit margin and net profit margin stood at 13.8% (1QFY25: 14.0%) and 1.2% (1QFY25: 0.8%).

The Company finances its working capital requirements through a combination of internal cash generation and short-term borrowings. In 1QFY26, the net working capital cycle stretched to 167 days (FY25: 159 days), while inventory levels remained optimal. Liquidity remains a key strength, with a current ratio of 5.4x (FY25: 6.1x) and free cash flows from operations of PKR 993mln (FY25: PKR 4.1bln). On the sustainability front, management plans to operate under a disciplined leverage management framework, anchored in cash generation through improved profitability, asset sales from the liquidation of group companies, and efficient working capital management. These measures are expected to support the deleveraging, liquidity enhancement, and long-term financial stability. The Company’s interest coverage and core operating coverage ratios remained moderate, although improvement in these metrics remains critical. The capital structure continues to be highly leveraged, with total leverage marginally declining to 78.1% (FY25: 78.4%) following a slight reduction in total debt. Management is actively pursuing a prudent approach to reducing leverage, while the equity base strengthened to PKR 6.6bln (FY25: 6.5bln), supported by a positive bottom line,

MSML intends to issue a rated, secured, privately placed, short-term Sukuk of PKR 3,000mln (inclusive of a green shoe option of PKR 1,500mln). The proceeds of the instrument will be utilized to finance the Company’s working capital requirements. The Sukuk carries a markup rate of 3MK/6MK plus 50bps* and has a tenor of six months. Both principal and profit will be repaid through a bullet payment at maturity. The Sukuk also includes a call option, allowing the issuer to partially or fully redeem the instrument with seven days’ prior notice. Once exercised, the call option will be irrevocable.

The instrument will be secured by a ranking charge over the Company’s current assets with a 25% margin. The instrument is subject to additional covenants, requiring the Company to maintain an adequate cushion in current assets throughout the Sukuk tenor, while ensuring that Sukuk-equivalent bank limits remain fully unutilized.

The Company will maintain a DPA (Debt Payment Account) and it will commence funding 21 days prior to maturity and will continue to be funded on a weekly basis, ensuring that the full issue amount is available in the DPA at least two days before maturity.